We thank the Editor Rachel Griffith and two anonymous referees for constructive comments, which substantially improved the article. We are also grateful to David Saal for generously providing us with the data for our empirical application. Laurens Cherchye gratefully acknowledges financial support from the Research Fund K.U.Leuven through the grant STRT1/08/004. Thomas Demuynck thanks the Fund for Scientific Research – Flanders (FWO-Vlaanderen) for his postdoctoral fellowship. Bram De Rock gratefully acknowledges the European Research Council (ERC) for his Starting Grant.
Non-parametric Analysis of Multi-output Production with Joint Inputs
Article first published online: 1 JUL 2013
© 2013 The Author(s). The Economic Journal © 2013 Royal Economic Society
The Economic Journal
Volume 124, Issue 577, pages 735–775, June 2014
How to Cite
Cherchye, L., Demuynck, T., De Rock, B. and De Witte, K. (2014), Non-parametric Analysis of Multi-output Production with Joint Inputs. The Economic Journal, 124: 735–775. doi: 10.1111/ecoj.12038
- Issue published online: 16 JUN 2014
- Article first published online: 1 JUL 2013
- Accepted manuscript online: 19 MAR 2013 09:31AM EST
- Manuscript Accepted: 22 JAN 2013
- Manuscript Received: 15 DEC 2011
We focus on analysing cost minimising production behaviour in multi-output settings. We distinguish between two approaches for modelling the use of joint inputs. The cooperative approach assumes cost minimisation at the aggregate firm level, while the non-cooperative approach assumes cost minimisation at the level of the individual output division. Our framework extends the existing non-parametric framework for analysing single output production. An empirical application to the English and Welsh drinking water and sewerage sector shows the practical usefulness of our framework. Specifically, we compare the empirical validity of the cooperative and non-cooperative models for describing the observed production behaviour.