PRODUCTION RISK AND EFFICIENT ALLOCATION OF RESOURCES

Efficient allocation of resources has usually been couched in risk less terms, partly because statistical techniques did not exist for measuring the impact of varying levels of factors of production on risks associated with production. Now that such techniques are available, methods are required for determining efficient allocations. Such models, particularly those exploiting stochastic efficiency analysis, are illustrated here with respect to empirical risk-sensitive, farm-firm production functions.