The purpose of this article is to improve the statistical analysis of multiproduct-firm behavior. Specifically, we are interested in modeling and estimating multiproduct technology focusing on size and product-line variation. Thus we offer a new empirical technique that can be used to directly analyze issues such as subadditivity, expansion-path subadditivity, economies of scope, and economies of diversification. Although applied papers employ a wide variety of theoretical multiproduct cost concepts, previous work uses nonfrontier estimation techniques. We show how to introduce frontier approaches to multiproduct cost analysis that can be applied to any of these concepts and improve the statistical analysis. Specifically, we introduce an empirical test using frontier techniques that allows for direct measures of economies of diversification at the firm-specific level.

To overcome the challenging food safety and security problem, in 2003, the Thai government initiated ‘Good Agricultural Practices’ (GAP) technology. This paper used a sample of 107 small chili farms from the Chiyaphoom province for the 2012 crop year, and data envelopment analysis (DEA) meta-frontier directional distance function technique to answer two questions: (1) Are GAP-adopting farms, on average, more efficient than conventional farms? (2) Does access to GAP technology affect farmers’ decisions to adopt GAP technology? We also developed an ‘indirect’ approach to reduce the potential sample selection bias for small samples. For the dry-season subsample, GAP farms were more technically efficient when compared with non-GAP farms. These dry-season non-GAP farms may not adopt the GAP method because they have limited access to GAP technology. For the rainy-season subsample, on average, GAP farms were more efficient than non-GAP farms at the 5% level. Access to the GAP technology is not a possible reason for non-GAP rainy season farms to not adopt the GAP technology. To enable sustainable development, government agencies and nongovernmental organizations (NGOs) must develop and implement appropriate educational and training workshops to promote and assist GAP technology adoption for chili farms in Thailand.