Inner and Outer Approximations of Technology: A Shadow Profit Approach
AbstractIn this paper we extend the taxonomy on inner and outer approximations to a technology by assuming that price data are not available. Mimicking Varian [Econometrica, 52(3) (1984) 579] we introduce a Weak Axiom of Shadow Profit Maximization (WASPM) to test if observed production plans are compatible with technically efficient behavior. If the test fails for an observed sample, we then characterize the maximal subset of observed production plans that meets WASPM and we derive lower and upper bounds on technical efficiency for production plans that are observed but not in this subset. We also derive linear programs to implement these bounds.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by IESEG School of Management in its series Working Papers with number 2012-ECO-06.
Length: 10 pages
Date of creation: Apr 2012
Date of revision:
Technical efficiency; Shadow prices; Bounds on inefficiency;
Other versions of this item:
- Leleu, Hervé, 2013. "Inner and outer approximations of technology: A shadow profit approach," Omega, Elsevier, vol. 41(5), pages 868-871.
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.:
- Robert Russell, R., 1985. "Measures of technical efficiency," Journal of Economic Theory, Elsevier, vol. 35(1), pages 109-126, February.
- Hanoch, Giora & Rothschild, Michael, 1972. "Testing the Assumptions of Production Theory: A Nonparametric Approach," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 256-75, March-Apr.
- Cherchye, Laurens & Van Puyenbroeck, Tom, 2007.
"Profit efficiency analysis under limited information with an application to German farm types,"
Elsevier, vol. 35(3), pages 335-349, June.
- Laurens Cherchye & Tom Van Puyenbroeck, 2002. "Profit Efficiency Analysis Under Limited Information. With an Application to German Farm Types," Public Economics Working Paper Series ces0202, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
- Per Andersen & Niels Christian Petersen, 1993. "A Procedure for Ranking Efficient Units in Data Envelopment Analysis," Management Science, INFORMS, vol. 39(10), pages 1261-1264, October.
- Varian, Hal R, 1984. "The Nonparametric Approach to Production Analysis," Econometrica, Econometric Society, vol. 52(3), pages 579-97, May.
- Subhash Ray, 2007. "Shadow profit maximization and a measure of overall inefficiency," Journal of Productivity Analysis, Springer, vol. 27(3), pages 231-236, June.
- Fare, Rolf & Li, Sung Ko, 1998. "Inner and outer approximations of technology: a data envelopment analysis approach," European Journal of Operational Research, Elsevier, vol. 105(3), pages 622-625, March.
- Fang, Hsin-Hsiung & Lee, Hsuan-Shih & Hwang, Shiuh-Nan & Chung, Cheng-Chi, 2013. "A slacks-based measure of super-efficiency in data envelopment analysis: An alternative approach," Omega, Elsevier, vol. 41(4), pages 731-734.
- Banker, Rajiv D & Maindiratta, Ajay, 1988. "Nonparametric Analysis of Technical and Allocative Efficiencies in Production," Econometrica, Econometric Society, vol. 56(6), pages 1315-32, November.
- Varian, Hal R., 1985. "Non-parametric analysis of optimizing behavior with measurement error," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 445-458.
- Tsionas, Efthymios G. & Papadakis, Emmanuel N., 2010. "A Bayesian approach to statistical inference in stochastic DEA," Omega, Elsevier, vol. 38(5), pages 309-314, October.
- Chambers, Robert G. & Chung, Yangho & Fare, Rolf, 1996. "Benefit and Distance Functions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 407-419, August.
- Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 125-140.
- Chen, Yao & Du, Juan & Huo, Jiazhen, 2013. "Super-efficiency based on a modified directional distance function," Omega, Elsevier, vol. 41(3), pages 621-625.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Monika Marin).
If references are entirely missing, you can add them using this form.