Abstract

There are two general approaches to the specification of production technologies. One starts with the specification of a production function, and from this derives the implied dual profit, cost, and revenue functions, as well as the system of output supply and input demand functions. The second approach starts with the specification of profit, cost, or revenue functions whose partial derivatives generate a system of output supply or input demand functions. Duality theory, as developed in Shephard (1953, 1970), McFadden (1970), Lau (1972), Jorgenson and Lau (1974), and Diewert (1974 b), illustrates the power of the second approach.

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