Journal of Productivity Analysis

, Volume 49, Issue 1, pp 37–47 | Cite as

Estimation of the two-tiered stochastic frontier model with the scaling property



The two-tiered stochastic frontier model has enjoyed success across a range of application domains where it is believed that incomplete information on both sides of the market leads to surplus which buyers and sellers can extract. Currently, this model is hindered by the fact that estimation relies on very restrictive distributional assumptions on the behavior of incomplete information on both sides of the market. However, this reliance on specific parametric distributional assumptions can be eschewed if the scaling property is invoked. The scaling property has been well studied in the stochastic frontier literature, but as of yet, has not been used in the two-tier frontier setting.


Incomplete information Nonlinear least squares Heteroskedasticity Identification 

JEL classification

C0 C1 


Compliance with ethical standards

Conflict of interest

The authors declare that they have no competing interests.


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© Springer Science+Business Media, LLC, part of Springer Nature 2017

Authors and Affiliations

  1. 1.University of MiamiMiamiUSA

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