Cost functions and nonlinear prices: Estimating a technology with quality-differentiated inputs

• 成果类型: Article
• 署名作者: Kolstad, CD; Turnovsky, MHL
• 署名单位: University of California System; University of California Santa Barbara; University of Washington; University of Washington Seattle
• 刊物名称: REVIEW OF ECONOMICS AND STATISTICS
• ISSN/ISSBN: 0034-6535
• DOI: 10.1162/003465398557546
• 发表日期: 1998-08
• 页码: 444-453
• 关键词: electric-power; undesirable outputs; implicit markets; hedonic prices; PRODUCTIVITY; pollution; parameters; generation; demand; models

摘要

The paper is concerned with developing a production theory for the case when some inputs have nonlinear prices because the price depends on endogenous quality. This involves extending the notion of a cost function to the case where nonlinear prices are parameters of costs. After developing the appropriate theory, we apply our results to the case of coal-fired electric power generation where fuel quality depends on sulfur and ash impurities. Environmental regulations induce a negative value on sulfur whereas ash impurities degrade performance and thus reduce production possibilities. A number of empirical results emerge, including significant rates of technological change that are sulfur and ash saving though capital using. This change may explain in part the recent drop in the price of sulfur allowances in the United States.