Vit is assumed to be independently and identically distributed as N(0,2 V). It represents random variation in landings per trip due to idiosyncratic factors like the weather. The term Uit is a nonnegative random variable, associated with technical inefficiency in production, assumed to be independent and identically distributed with truncation (at zero) of
the distribution N(it,2 u). Uit¼0 when production isas high as can be, and Uit >0 if there are production inefficiencies. The stochastic production function (1) may be estimated using a maximum likelihood technique and would yield parameter estimates for s and variance parameters, 2 ¼ 2 V þ2 U, ¼UþVand ¼ 2 U=2. The estimates of the variance parameters indicate how much of the output variation of each boat per trip is due to inefficiencies rather than random variations.4 The technical efficiency of the i-th boat on the t-th trip is given by,