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In search for the most preferred solution in value efficiency analysis

Author

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  • Panagiotis Ravanos

    (University of Macedonia)

  • Giannis Karagiannis

    (University of Macedonia)

Abstract

Choosing the Most Preferred Solution (MPS), namely a real or artificial Decision Making Unit (DMU) reflecting the decision maker’s preferences over the desirable structure of inputs and outputs, is of particular importance in Value Efficiency Analysis (VEA). In this paper, we review various MPS choices used in the VEA literature and propose some new, which rely respectively on the relative position of frontier DMUs, the Most Productive Scale Size (MPSS), the Average Production Unit (APU), and common vectors of weights. The suggested MPS choices reflect overall organizational goals such as the pursuit of scale economies and the maximization of structural efficiency, or the need to assess DMUs against common standards because of limited control over the resources allocated to them or autonomy in setting their own priorities. The potential implications of using different MPSs in VEA are illustrated by providing comparative empirical results using a dataset of 526 Greek cotton farms.

Suggested Citation

  • Panagiotis Ravanos & Giannis Karagiannis, 2022. "In search for the most preferred solution in value efficiency analysis," Journal of Productivity Analysis, Springer, vol. 58(2), pages 203-220, December.
    • Handle: RePEc:kap:jproda:v:58:y:2022:i:2:d:10.1007_s11123-022-00645-0
    DOI: 10.1007/s11123-022-00645-0
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    Cited by:

    1. Giannis Karagiannis & Panagiotis Ravanos, 2023. "On Value Efficiency Analysis and Cone-Ratio Data Envelopment Analysis models," Discussion Paper Series 2023_03, Department of Economics, University of Macedonia, revised Mar 2023.

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    More about this item

    Keywords

    Value efficiency analysis; Most preferred solution; DMU frontier position; Most productive scale size; Average production unit; Common weights;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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