Estimating multiproduct cost functions over time using a mixture of normals

This article proposes the use of finite mixtures of probability distributio ns to estimate cost functions. The mixture technique allows for the simulta neous existence and unobservability of multiple technologies of production. Technology switching by firms and conventional technical change can be stu died directly. We illustrate the technique on a large sample of U.S. Saving s and Loan companies, and find strong evidence of multiple technologies. We compare the mixture results to conventional stochastic cost frontier and t hick frontier models, and highlight their differences.