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Inefficiency

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We introduce an ordinal model of efficiency measurement. Our primitive is a notion of efficiency that is comparative, but not cardinal or absolute. In this framework, we postulate axioms that we believe an ordinal efficiency measure should satisfy. Primary among these are choice consistency and planning consistency, which guide the measurement of efficiency in a firm with access to multiple technologies. Other axioms include symmetry, which states that the names of commodities do not matter, scale-invariance, which says that units of measurement of commodities does not matter, and strong monotonicity, which states that efficiency should decrease if the inputs and outputs remain static when the technology becomes unambiguously more efficient. These axioms characterize a unique ordinal efficiency measure which is represented by the coefficient of resource utilization. By replacing symmetry (the weakest of our axioms) with a very mild continuity condition, we obtain a family of path-based measures.

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Bibliographic Info

Paper provided by University of Haifa, Department of Economics in its series Working Papers with number WP2011/14.

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Length: 27
Date of creation:
Date of revision: 30 Nov 2011
Handle: RePEc:haf:huedwp:wp201114

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Keywords: Efficiency Measurement; Coefficient of Resource Utilization; Ordinal; Choice Consistency; Planning Consistency; Path-based;

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References

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  1. Christopher Chambers & Alan Miller, 2011. "Rules for aggregating information," Social Choice and Welfare, Springer, vol. 36(1), pages 75-82, January.
  2. R. Russell & William Schworm, 2011. "Properties of inefficiency indexes on 〈input, output〉 space," Journal of Productivity Analysis, Springer, vol. 36(2), pages 143-156, October.
  3. Dinko Dimitrov & Thierry Marchant & Debasis Mishra, 2012. "Separability and aggregation of equivalence relations," Economic Theory, Springer, vol. 51(1), pages 191-212, September.
  4. R. Robert Russell & William Schworm, 2007. "Axiomatic Foundations of Efficiency Measurement on Data-Generated Technologies," Discussion Papers 2007-35, School of Economics, The University of New South Wales.
  5. Bruno Leclerc & Bernard Monjardet, 2010. "Aggregation and residuation," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00504982, HAL.
  6. Miller, Alan D., 2008. "Group identification," Games and Economic Behavior, Elsevier, vol. 63(1), pages 188-202, May.
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Cited by:
  1. Adamson, David & Mallawaarachchi, Thilak & Quiggin, John C., 2002. "Water use and salinity in the Murray–Darling Basin: A state-contingent model," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(3), September.
  2. Huettel, Silke & Narayana, Rashmi & Odening, Martin, 2011. "Measuring dynamic efficiency under uncertainty," Structural Change in Agriculture/Strukturwandel im Agrarsektor (SiAg) Working Papers 129062, Humboldt University Berlin, Department of Agricultural Economics.
  3. Robert G. Chambers & Atakelty Hailu & John Quiggin, 2007. "Event-specific Data Envelopment Models and Efficiency Analysis," Risk & Uncertainty Working Papers WPR07_8, Risk and Sustainable Management Group, University of Queensland.
  4. Blundell,Richard & Newey,Whitney K. & Persson,Torsten (ed.), 2006. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9780521692083.
  5. Robert Chambers & John Quiggin, 2007. "Information value and efficiency measurement for risk-averse firms," Journal of Productivity Analysis, Springer, vol. 27(3), pages 197-208, June.
  6. Hughes, Neal & Lawson, Kenton & Davidson, Alistair & Jackson, Tom & Sheng, Yu, 2011. "Productivity pathways: climate-adjusted production frontiers for the Australian broadacre cropping industry," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100563, Australian Agricultural and Resource Economics Society.
  7. Salim, Ruhul A. & Islam, Nazrul, 2010. "Exploring the impact of R&D and climate change on agricultural productivity growth: the case of Western Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(4), December.

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