Measuring Productive Efficiency in Multiple Product Agribusiness Firms: A Dual Approach

Measuring retail fertilizer plant efficiency is difficult, given the range of outputs produced by these multiple product firms. A frontier multiproduct cost function was employed to measure productive efficiency. Results suggest the average plant could lower variable costs by 10% through more effective operations. Allocative inefficiency was minimal, indicating management should focus on improving technical efficiency. The limitations of employing a single‐product model in a multiproduct situation are demonstrated.