Temporal Technical and Profit Efficiency Measurement: Definitions, Duality and Aggregation Results
AbstractThe shortage function, an important tool in production theory, measures potential increases in outputs and decreases in inputs for a given direction g at a given date. To develop a temporal version of technical efficiency measurement, we introduce the concept of a temporal shortage function. This temporal efficiency measure is easily computed using linear programming. We also establish a duality result stating that the temporal profit function and the temporal shortage function are dual to one another. This result has two consequences. First, one can derive a shadow price path via the shadow prices of the temporal shortage function. Second, transposing the classic Farrell inefficiency decomposition, temporal profit efficiency is decomposed into temporal technical and temporal allocative efficiency components. Finally, in line with the recent literature on aggregation over firms, this contribution treats the possibilities and limits of the aggregation of efficiency measures over time.
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Bibliographic InfoPaper provided by IESEG School of Management in its series Working Papers with number 2005-ECO-01.
Length: 26 pages
Date of creation: May 2005
Date of revision:
Publication status: Published in International Journal of Production Economics, September 2006, 103(1), pp. 48-63
Temporal shortage function; temporal profit function; aggregation over time;
Other versions of this item:
- Briec, Walter & Comes, Christine & Kerstens, Kristiaan, 2006. "Temporal technical and profit efficiency measurement: Definitions, duality and aggregation results," International Journal of Production Economics, Elsevier, vol. 103(1), pages 48-63, September.
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