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An Analysis of Ill-Posed Production Problems Using Maximum Entropy
Quirino Paris and Richard E. Howitt
American Journal of Agricultural Economics
Vol. 80, No. 1 (Feb., 1998), pp. 124-138
Stable URL: http://www.jstor.org/stable/3180275
Page Count: 15
You can always find the topics here!Topics: Matrices, Variable costs, Entropy, Crop economics, Crops, Marginal costs, Cost functions, Economic models, Farm economics, Econometrics
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Production economics problems are often ill-posed. This means that the number of parameters to be estimated is greater than the number of observations. In this article we show how to recover flexible cost functions from very limited data sets using a maximum entropy approach. We also argue that there exists a continuum of analysis between mathematical programming and traditional econometric techniques which is based solely upon the available information. The limiting case of a multi-output cost function recovered using only a single observation of a farmer's allocation decisions can be easily extended to handle more than one observation.
American Journal of Agricultural Economics © 1998 Agricultural & Applied Economics Association