Positive Mathematical Programming

Abstract

A method for calibrating models of agricultural production and resource use using nonlinear yield or cost functions is developed. The nonlinear parameters are shown to be implicit in the observed land allocation decisions at a regional or farm level. The method is implemented in three stages and initiated by a constrained linear program. The procedure automatically calibrates the model in terms of output, input use, objective function values and dual values on model constraints. The resulting nonlinear models show smooth responses to parameterization and satisfy the Hicksian conditions for competitive firms.