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Additive General Error Models for Production, Cost, and Derived Demand or Share Systems

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McElroy, Marjorie B.·1987·Journal of Political Economy

Abstract

Many empirical studies of production specify a deterministic model of the firm, derive the implied behavioral equat ions (input demand or share system), and then "embed this system in a stochastic framework" by tacking on linear error terms. In contras t, this paper proposes general error models (GEMs) in which the error specification is an integral part of the optimization model. These m odels are the statistical embodiment of Stigler's view that apparent observed inefficiencies reflect the investigator's ignorance of the t rue optimization problems. Additive GEMs are proposed and interpreted Specification tests indicate that a translog additive GEM is superi or to the standard translog specification. Copyright 1987 by University of Chicago Press.

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Metadata

Authors
McElroy, M. B.
Venue
Journal of Political Economy
Published
1987-08
Volume
95
Issue
4
Pages
737-757
ISSN
  • 0022-3808 (ISSN-L)
  • 1537-534X
OpenAlex
W2164710178
Cited by
159
References
1
FWCI
18.08
Type
journal article
Language
en
Open access
green

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CoChat. (2026). Citation check: Additive General Error Models for Production, Cost, and Derived Demand or Share Systems. https://app.cochat.ai/papers/10.1086/261483
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McElroy, M. B. (1987). Additive General Error Models for Production, Cost, and Derived Demand or Share Systems. Journal of Political Economy. https://doi.org/10.1086/261483

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Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.