Q2 Z2,(Q2) Z2(Q2) - Institute for Water Resources - U.S. Army

The planning function also exhibited reasonable properties and had
significant parameter estimates. The results indicate decreasing returns
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to scale when the firm's stock of equipment is considered. The time trend
coefficient was positive, an indication of technological improvements in
the industry.
A possible conclusion is that scheduling difficulties increase as
the volume of output grows, making, additions to the capital stock less
productive overall. Although Howe's process function showed decreasing
returns, the results for the production function indicate that the firm
is able to schedule tows out of a fixed stock of equipment subject to
increasing returns, as would be expected. However, the planning func-
tion indicated that as the firm adds to its capital stock to meet the
requirements of growing demand (i.e.,as the total number of tows to be
scheduled increases) it does so subject to decreasing returns.
In the work of Hurter, statistical cost and production relation-
ships were estimated for three years (1950, 1957, 1962) using annual
Interstate Commerce Commission data on Class A certificated waterway
carriers operating on the Mississippi River.
Hurter's production study 8 followed closely the methodology devel-
oped by Howe. Hurter estimated six production relationships, three of
which he characterizes as planning functions in the sense in which Howe
employed the term. The stated objective of Hurter's study is to describe
the production and planning functions applicable to the firms in the
sample and to make "year-wise" comparisons in order to determine ". . .
the change in input combinations that have taken place in response to
technological and environmental change."9 The six relationships are:
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