© 1989 Oxford University Press and the Foundation for the European Review of Agricultural Economics
research-article |
Aggregation of heterogeneous firms in mathematical programming models
1Dept of Agricultural Economics, University of Illinois
2Dept. of Agricultural Economics, Texas A & M University
Received June 1, 1989;
Summary
Serious aggregation errors may arise in mathematical programming sector models when aggregation is not properly done. Existing aggregation literature mostly focuses on exact aggregation of homogenous groups of firms. However, homogeneity rarely holds in real problem situations. Moreover, theoretical aggregation developments are generally based on the assumption of availability of full information about the firms to be aggregated. Such full information is hardly a plausible assumption when modelling the agricultural sector. This paper discusses an empirical aggregation approach based on decomposition theory which may be particularly helpful while aggregating heterogenous firms under the absence of full information.