Abstract
We propose a nonparametric model for global cost minimization as a framework for optimal allocation of a firm's output target across multiple locations, taking account of differences in input prices and technologies across locations. This should be useful for firms planning production sites within a country and for foreign direct investment decisions by multi-national firms. Two illustrative examples are included. The first example considers the production location decision of a manufacturing firm across a number of adjacent states of the US. In the other example, we consider the optimal allocation of US and Canadian automobile manufacturers across the two countries.
Recommended Citation
Ray, Subhash C.; Chen, Lei; and Mukherjee, Kankana, "Input Price Variation Across Locations and a Generalized Measure of Cost Efficiency" (2008). Economics Working Papers. 200811.
https://digitalcommons.lib.uconn.edu/econ_wpapers/200811