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Semi-radial technical efficiency measurement

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  • Cherchye, Laurens
  • Van Puyenbroeck, Tom

Abstract

Semi-radial efficiency measurement combines technical efficiency, as captured by the classical Farrell measure, with an economically meaningful mix efficiency component. The semi-radial evaluation we propose proceeds in two steps. First, we build on the price interpretation of the generally accepted Koopmans efficiency notion to characterize appropriate benchmarks. Next, we present both a quantity-based distance measure and its dual (price-based) equivalent to evaluate the mix efficiency factor. The type of measures we propose may, e.g., be used to provide a price rationale for the Zieschang technical efficiency evaluation procedure.

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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Operational Research.

Volume (Year): 193 (2009)
Issue (Month): 2 (March)
Pages: 616-625

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Handle: RePEc:eee:ejores:v:193:y:2009:i:2:p:616-625

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Web page: http://www.elsevier.com/locate/eor

Related research

Keywords: Koopmans technical efficiency Farrell measure Indication problem Mix efficiency Shadow price interpretation Data envelopment analysis;

References

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  1. Fare, Rolf & Knox Lovell, C. A., 1978. "Measuring the technical efficiency of production," Journal of Economic Theory, Elsevier, vol. 19(1), pages 150-162, October.
  2. McFadden, Daniel, 1978. "Cost, Revenue, and Profit Functions," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 1 McMaster University Archive for the History of Economic Thought.
  3. Robert Russell, R., 1985. "Measures of technical efficiency," Journal of Economic Theory, Elsevier, vol. 35(1), pages 109-126, February.
  4. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, September.
  5. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
  6. Laurens CHERCHYE & Tom VAN PUYENBROECK, 1999. "Product Mixes as Objects of Choice in Nonparametric Efficiency Measurement," Center for Economic Studies - Discussion papers ces9901, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  7. Salnykov, Mykhaylo & Zelenyuk, Valentin, 2005. "On the Commensurability of Directional Distance Functions," MPRA Paper 7068, University Library of Munich, Germany.
  8. Silva Portela, Maria Conceicao A. & Thanassoulis, Emmanuel, 2005. "Profitability of a sample of Portuguese bank branches and its decomposition into technical and allocative components," European Journal of Operational Research, Elsevier, vol. 162(3), pages 850-866, May.
  9. Fare, Rolf & Grosskopf, Shawna & Lovell, C A Knox, 1983. " The Structure of Technical Efficiency," Scandinavian Journal of Economics, Wiley Blackwell, vol. 85(2), pages 181-90.
  10. Charnes, A. & Cooper, W. W. & Golany, B. & Seiford, L. & Stutz, J., 1985. "Foundations of data envelopment analysis for Pareto-Koopmans efficient empirical production functions," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 91-107.
  11. Zieschang, Kimberly D., 1984. "An extended farrell technical efficiency measure," Journal of Economic Theory, Elsevier, vol. 33(2), pages 387-396, August.
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Cited by:
  1. Genius, Margarita & Stefanou, Spiro E. & Tzouvelekas, Vangelis, 2012. "Measuring productivity growth under factor non-substitution: An application to US steam-electric power generation utilities," European Journal of Operational Research, Elsevier, vol. 220(3), pages 844-852.

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