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Estimating economies of scope and scale under price risk and risk aversion

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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

DOI: http://dx.doi.org/10.1080/00036840500367716

Affiliations: 1: Department of Economics, The University of the West Indies, Kingston 7, Jamaica 2: Department of Agricultural Economics, Kansas State University, Manhattan, USA

Publication date: February 10, 2006

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