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Using VCR to assess profitability


Value/cost ratios (VCRs) provide a useful framework for evaluating the profitability of inputs - and the drivers of profitability that unifies factors including prices, transfer costs, risk aversion, end-user discount rates, and the average product of inputs. All of these factors are adjustable using the interactive spreadsheet that produced the above figure, which can be downloaded by clicking the button at the bottom of this page.

My coauthors and I used this in this 2019 publication - if you find this material useful, we would certainly appreciate a citation.