Estimation and Aggregation of Firm Supply Functions

Abstract

Five years ago Nerlove and Bachman provided an excellent review of research on agricultural supply and discussed current problems and approaches to solving these problems. Since that time considerable effort has been concentrated on estimating supply functions using linear programming models for representative farms. This article reviews some of the recent research in this approach to estimating supply. The interrelationships among regional linear programming studies, aggregation models, producer panels, and recursive programming models are discussed. Although progress has been made in solving problems relating to the construction and aggregation of firm supply functions and in creating a more dynamic firm model, many additional problems must be solved if this approach is to provide usable estimates of national and regional supply.