A Bayesian Analysis of Vegetable Production in Japan

Microeconomic theory often assumes that a producer maximizes its profit. As a consequence, under perfect competition, the optimal production amount is either zero or positive, where the latter satisfies the condition that the price is equal to the cost for the additional production amount (the marginal cost). This paper proposes two statistical models directly derived from this relationship and develops a Bayesian estimation method for the parameters included in this relationship. The models are applied to analyze vegetable production in Japan.