Farm-level nonparametric analysis of cost-minimization and profit-maximization behavior

This study investigates non-parametrically the optimizing behavior of a sample of 289 Kansas farms under profit-maximization and cost-minimization hypotheses. The study uses both deterministic and stochastic non-parametric tests. The deterministic results do not support strict adherence to either optimization hypothesis. The stochastic tests suggest that all 289 farms fail the profit-maximization hypothesis, whereas 171 farms failed the cost-minimization hypothesis. Allowing for non-regressive technical change does not alter the basic results; 276 farms violate the profit-maximization hypothesis and 138 violate the cost-minimization hypothesis. The evidence against cost-minimization behavior seems to be far less substantial than that against profit-maximization behavior.


Issue Date:
1995-11
Publication Type:
Journal Article
Record Identifier:
http://ageconsearch.umn.edu/record/173724
PURL Identifier:
http://purl.umn.edu/173724
Published in:
Agricultural Economics: The Journal of the International Association of Agricultural Economists, Volume 13, Issue 2
Page range:
109-117
Total Pages:
10




 Record created 2017-04-01, last modified 2018-01-22

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