AbstractWe 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 InfoPaper provided by University of Haifa, Department of Economics in its series Working Papers with number WP2011/14.
Date of creation:
Date of revision: 30 Nov 2011
Efficiency Measurement; Coefficient of Resource Utilization; Ordinal; Choice Consistency; Planning Consistency; Path-based;
Find related papers by JEL classification:
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-12-13 (All new papers)
- NEP-EFF-2011-12-13 (Efficiency & Productivity)
- NEP-UPT-2011-12-13 (Utility Models & Prospect Theory)
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