Software development projects are notorious for cost overruns and schedule
delays. While dozens of software cost models have been proposed, few of the
m seem to have any degree of consistent accuracy. One major factor contribu
ting to this persistent and wide spread problem is an inadequate understand
ing of the real behavior of software development processes. We believe that
software development could be studied as an economic production process an
d that established economic theories and methods could be used to develop a
nd validate software production and cost models. Here, we present the resul
ts of evaluating four alternative software production models using the P-te
st, a statistical procedure developed specifically for testing the truth of
a hypothesis in the presence of alternatives in econometric studies. We fo
und that the truth of the widely used Cobb-Douglas type of software product
ion and cost models (e.g., COCOMO) cannot be maintained in the presence of
quadratic or translog models. Overall, the quadratic software production fu
nction is shown to be the most plausible model for representing software pr
oduction processes. Limitations of this study and future directions are als
o discussed.