* A Nonparametric Average Cost Function
*
* Keywords:
*     regression, nonparametric, average cost, plot
*
* Description:
*     We illustrate how to estimate a model for Average Costs in Electricity
*     Supply industry nonparametrically
*     and plot it
*
* Author(s):
*     Noel Roy
*     Skif Pankov
*
* Source:
*    William H. Greene, Econometric Analysis - 7th Edition
*    Pearson International Edition, Chapter 7, Example 7.12 (page 254)
*
* Reading the data and naming variables
read (TableF4-4.shd)  id year cost output

* Sorting the data in output order
sort output cost

sample 6 140

* Generating average cost
genr ac=cost/output

* Smoothinh the effect of output on average cost using kernel extimation
* and saving the predicted values in a vector achat
nonpar ac output / predict=achat

* Replicating figure 7.8
graph ac achat output

* replicating figure 7.9 by setting the bandwidth to 0.04
nonpar ac output /predict=achat smooth=0.04

* Replicating figure 7.9
graph  achat output /lineonly

stop