The State‐Contingent Properties of Stochastic Production Functions

The state‐contingent properties of the most frequently used representations of stochastic production in the agricultural‐economics literature are examined. Particular attention is paid to the cases of multiplicative uncertainty, additive uncertainty, and the Just‐Pope production function. State‐contingent technologies and their associated cost functions are reviewed, and that theory is applied to the stochastic production function. A generalization of the Just‐Pope technology that has desirable state‐contingent characteristics is proposed. Cost functions based upon state‐contingent technologies are compared with cost functions based on a parametrized distribution representation of production uncertainty.