Too Large or Too Small? Returns to Scale in a Retail Network
AbstractPerformance in retailing is usually evaluated by routine use of ratio analysis, but due to the univariate nature of this simple management tool there are many drawbacks to the obtained results. Therefore, the aim of this study is to demonstrate successful employment of parametric and non–parametric methods for evaluating technical performance in retailing. We also show how to utilize DEA results, when parametric methods do not satisfactorily perform due to their strict distributional assumptions. Results of this study are used to optimize the retail chain of a European mobile telecommunication network operator by providing estimates of and recommendations for improvements in the productive efficiency of the chain operations. Estimates of store–level technical and scale efficiency indicate that a majority of stores are operating in the decreasing returns to scale region of the production possibility set. The employed methodology allows us to identify input excesses and to address a means of reducing them.
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Bibliographic InfoPaper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp273.
Date of creation: Sep 2005
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Data envelopment analysis application; linear programming; ef-ficiency; retail units;
Find related papers by 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
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-11-05 (All new papers)
- NEP-BEC-2005-11-05 (Business Economics)
- NEP-EFF-2005-11-05 (Efficiency & Productivity)
- NEP-NET-2005-11-05 (Network Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
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