Non‐Parametric Analysis of Multi‐Output Production with Joint Inputs

41 Pages Posted: 17 Jun 2014

See all articles by L. Cherchye

L. Cherchye

KU Leuven; Erasmus Research Institute of Management (ERIM)

Thomas Demuynck

Catholic University of Leuven (KUL) - Campus Kortrijk (KULAK) - Subfaculty of Economics and Applied Economics

Bram De Rock

Katholieke Universiteit Leuven Campus Kortrijk (KULAK)

K. De Witte

University of Leuven (KUL); Maastricht University

Date Written: June 2014

Abstract

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.

Suggested Citation

Cherchye, Laurens and Demuynck, Thomas and De Rock, Bram and De Witte, Kristof, Non‐Parametric Analysis of Multi‐Output Production with Joint Inputs (June 2014). The Economic Journal, Vol. 124, Issue 577, pp. 735-775, 2014, Available at SSRN: https://ssrn.com/abstract=2451838 or http://dx.doi.org/10.1111/ecoj.12038

Laurens Cherchye (Contact Author)

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant
Belgium

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Thomas Demuynck

Catholic University of Leuven (KUL) - Campus Kortrijk (KULAK) - Subfaculty of Economics and Applied Economics ( email )

Etienne Sabbelaan 53
Kortrijk, B-8500
Belgium

Bram De Rock

Katholieke Universiteit Leuven Campus Kortrijk (KULAK) ( email )

Etienne Sabbelaan 53
Kortrijk, B-8500
Belgium

Kristof De Witte

University of Leuven (KUL) ( email )

Naamsestraat 69
Leuven, Vlaams Brabant B-3000
Belgium

HOME PAGE: http://www.feb.kuleuven.be

Maastricht University ( email )

Boschstraat 24
Maastricht, Vlaams-Brabant 6211 AX
Netherlands
003216326656 (Phone)

HOME PAGE: http://www.feb.kuleuven.be

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