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Testing for production with complementarities

Abstract:
Suppose we observe a finite number of input decisions made by a firm, as well as the prices at which those inputs were acquired. What conditions on the set of observations are necessary and sufficient for it to be consistent with a firm choosing inputs to maximize profit, subject to a production function exhibiting production complementarities? In this paper, we develop an axiomatic characterisation of this hypothesis and also develop a test that can be easily applied to finite data sets.
Publication status:
Published

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Publisher:
University of Oxford
Series:
Department of Economics Discussion Paper Series
Publication date:
2014-09-10
Paper number:
722

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