Estimating economies of scope and scale under price risk and risk aversion
Abstract:This study uses duality to examine the effects of excluding output price risk and risk aversion on cost structures. Using data for Kansas wheat and beef-cow operations, a dual risk model was used to determine multi-product and product-specific scale economies, and economies of scope. Estimates for these measures were compared with those obtained from a deterministic model. The results show that product-specific scale economies are over-estimated and economies of scope and multi-product scale economies are under-estimated for the deterministic model compared to the risk model.
Document Type: Research Article
Publication date: February 10, 2006