where yijt ¼ ln Yijt ; uijt ¼ ln Uijt ; pkt ¼ ln Pkt ; k ¼ 1;…; K
and {1ijt} are assumed to be independently and identically
distributed error terms.
This function includes marginal prices. While it is
possible to calculate average prices for factor inputs and use
these averages as proxies for marginal prices, some factor