THE OUTPUT-COST RELATIONSHIP FOR RETAIL FERTILIZER PLANTS: AN EMPIRICAL APPLICATION OF MULTIPRODUCT FIRM THEORY

Retail fertilizer plants produce a number of products and services. To analyze the relationship between cost and output for these multiproduct firms, a shoit-run, translog cost function is estimated using pooled data. Results indicate plants can lower average cost by increasing output and by diversifying into anhydrous ammonia. Furthermore, preliminary evidence indicates that firms in the sample are over-invested in plant and equipment