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

The Statistical Model
A statistical cost function has been estimated with the above
described data. The form of the function is:
20
loa Cost/EBM =
°10
log io a o + a l log ioHF + a2 log 10 EBM + a 3KN + E B.R +
i=1
.
3 5 4
E y.A. + E 6,C, + E A n y n
j=1 J k=1 1' L=1
where: Cost = annual total direct towboat cost for each boat .
EBM = Equivalent Barge Miles produced by each boat in each year
'BF = towboat horsepower
KN = Kort nozzle dummy variable (1 = presence of Kort nozzles)
R .
= percent time towboat operated on ith river district
(Lower Illinois excluded)
A = dummy variables for towboat age (A1 = 1 indicates the tow-
boat was built prior to 1050. 1960-1965 excluded)
C k = dummy variables for each company
y = dummy variables for year (Y 1 = 1 is 1962, etc., 1966 ex-
cluded)
In many regression models in econpmics, economic theory does not
indicate the correct specification of the function to be estimated.
Frequently, however, statistical theory indicates a choice. One model
may be preferred in particular circumstances because it avoids statis-
tical biases which may occur due to the nature of the data. One example
of this is the choice between the total and average functional forms
for cost estimation.
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