Input Decisions and Price-Quality Schedules

Often, a single production process gives rise to a mass distribution of quality levels. If prices vary with quality, then input use is determined by interactions between the production-quality-input use relationship and the price-quality relationship. Using the dominance methods, the way in which price-quality schedules affect optimal input choices is investigated. Integral and differential conditions on changes in schedules are found that, together with conditions on the quality-conditioned technology, are sufficient to determine changes in the intensity of input use.