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Ray-Homothetic Production Functions

Rolf Fare
Ronald W. Shephard

Abstract

The notion of homotheticity is extended for production correspondences to span many special structures, with properties such as homogeneity, global homotheticity, semi-homogeneity, quasi-homogeneity, with a scaling law common to these structures which is also equivalent to linear expansion paths, thereby showing by comparison the generality of the latter. In these terms one may consider output-mix-dependent factor price deflation of cost and input-mix-dependent output price deflation of revenue.