An empirical input allocation model for the cost minimizing multiproduct firm

- We focus on the multiproduct firm that minimizes cost before maximizing profit.
- A linear parameterization of the theoretical input allocation model is derived.
- From the linear parameterization, we formulate an empirical input allocation model.
- In general form, the empirical model allows for joint production.
- Input-output separability and input independence can be tested empirically.

Laitinen and Theil (1978) derive a theoretical input allocation model for a multiproduct firm that first minimizes cost and second maximizes profit. However, its empirical counterpart is not available. We linearize the model and derive a general empirically estimable model.