An Analysis of cost function two-product firm: Case Study Water and Wastewater Company Markazi Province

The main purpose of this paper is examination of elasticity partial replacement and price elasticity, also investigation Economies of Scale and Return to Scale in Markazi province water and Wastewater Company. This is the reason translog cost function is used to estimate the cost function of the water supply in this company. The framework of analysis is in accordance to the seemingly unrelated regression (SUR) technique. To estimate the parameters of the cost function we have used the panel data for the period of 2006-2011 has been used. The results of the study show that labor force and capital are replaced. Elasticity of demand for labor force input is greater than elasticity of demand capital input. In addition, non-household water distribution in other industrial towns has economy of scale in Markazi province, in the other towns (non-industrial), there is no economy of scale to distribute non-household water.