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  6. SUCCESS IN MAXIMIZING PROFITS AND REASONS FOR PROFIT DEVIATION ON DAIRY FARMS

SUCCESS IN MAXIMIZING PROFITS AND REASONS FOR PROFIT DEVIATION ON DAIRY FARMS

File(s)
Cornell_Dyson_wp9705.pdf (677.6 KB)
Permanent Link(s)
https://hdl.handle.net/1813/57940
Collections
Dyson School Working Papers
Author
Tauer, Loren W.
Stefanides, Zdenko
Abstract

The Weak Axiom of Profit Maximization (WAPM) was used to test how successful each of 70 individual New York State dairy farms was in maximizing profits using nine years of data. The netput vectors were corrected for technological change using nonparametric indices that do not require the assumption of profit maximization nor any functional form for the underlying technology. These technology indices are consistent with the nonparametric assumptions used in the WAPM tests. The average negative WAPM deviation over the 70 farms was .20, indicating that on average these farms could have selected available netput vectors that would have increased profits by 20 percent of total receipts. A tobit regression showed that the available characteristics on these farms explained very little of the variability in their abilities to select the best netput vectors. Yet, increased age and additional education increased the ability to select the best netput vector.

Description
WP 1997-05 April 1997
Date Issued
1997-04-01
Publisher
Charles H. Dyson School of Applied Economics and Management, Cornell University
Type
article

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