THE MODEL ASSUMED THAT POLICE DEPARTMENTS ACT TO MINIMIZE COSTS SUBJECT TO A SPECIFIED ACCEPTABLE LEVEL OF OUTPUT, OR EQUIVALENTLY, ACT TO MAXIMIZE OUTPUT SUBJECT TO A BUDGET DETERMINED BY ELECTED OFFICIALS. THE INVESTIGATORS ASSUMED AN INDEX OF OUTPUT, SUCH AS PUBLIC SAFETY, BUT DID NOT TRY TO MEASURE IT. AN INDIRECT PRODUCTION FUNCTION WITH THE FUNCTIONAL STRUCTURE OF IMPLICIT INDIRECT ADDITIVITY WAS CHOSEN AS THE MODEL BECAUSE ITS CHARACTERISTICS WERE GENERAL ENOUGH TO ALLOW FOR DIFFERENT ELASTICITIES OF SUBSTITUTION BETWEEN FACTORS AND FOR NONHOMOTHETICITY. STILL IT REQUIRES ESTIMATION OF FEWER PARAMETERS THAN IN MORE GENERAL PRODUCTION FUNCTIONS. CALIFORNIAN CITIES STUDIED WERE LOS ANGELES, SAN FRANCISCO, OAKLAND, SAN DIEGO, AND LONG BEACH. ACTUAL QUANTITIES OF INPUTS USED AND PRICES AT WHICH THEY WERE PURCHASED WERE INCLUDED IN THE ESTIMATION OF THE MODEL. A MAJOR FINDING WAS THAT THE PRODUCTION FUNCTION WAS NONHOMOTHETIC, SUGGESTING THE PRESENCE OF INEFFICIENCY IN SERVICE PRODUCTION. THE MODEL DETERMINED ALL ASPECTS OF THE PRODUCTION AND COST FUNCTION EXCEPT RETURNS TO SCALE. THE RESULTS SUGGEST THAT THE AMOUNT OF PUBLIC SAFETY EXPERIENCED BY CITIZENS DEPENDS NOT ONLY ON INCOME AND PRICES OF SUBSTITUTES, BUT ALSO ON THEIR POLICE DEPARTMENT'S INEFFICIENCY; THIS INEFFICIENCY WILL RAISE THE PRICES ON AND REDUCE THE POSSIBLE AMOUNT OF THE PUBLIC SAFETY PRODUCT. ADDITIONAL ANALYSES SUPPORT THE CONCLUSIONS REGARDING THE PRESENCE OF INEFFICIENCY IN POLICE SERVICE PRODUCTION. TABLES, FOOTNOTES, AND A BIBLIOGRAPHY ARE INCLUDED. FOR THE COMPLETE VOLUME OF WHICH THIS STUDY IS A PART, SEE NCJ61013. (CFW)