ANALYSIS OF INPUT DEMAND AND OUTPUT SUPPLY FUNCTIONS IN CZECH MILK PRODUCTION

The paper deals with an analysis of input demand and output supply functions for the dairy sector in the Czech Republic. The analysis is based on a balanced panel dataset of 36 milk producers within the period 2004–2007. A Cobb-Douglas production function is fitted to describe the production process of the analyzed sample. The heterogeneous technology or efficiency of individual producers is captured by using the method of fixed effects. Then, the results show that the technology is significantly heterogeneous in the analyzed sample, and this causes significant differences in the derived input demand functions and the short-run conditional output supply function. Finally, an analysis of input demand functions and the short-run conditional output supply function shows that the behaviour of more than 50% of the analyzed milk producers is consistent with rational behaviour