Advanced Search
MyIDEAS: Login to save this paper or follow this series

Analyzing Cost Efficient Production Behavior Under Economies of Scope: A Nonparametric Methodology

Contents:

Author Info

  • Cherchye, Laurens

    ()
    (K.U.Leuven)

  • De Rock, Bram

    ()
    (ECARES, Free University of Brussels)

  • Vermeulen, Frederic

    ()
    (Tilburg University)

Abstract

In designing a production model for firms that generate multiple outputs, we take as a starting point that such multi-output production refers to economies of scope, which in turn originate from joint input use and input externalities. We provide a nonparametric characterization of cost efficient behavior under these conditions, and subsequently institute necessary and sufficient conditions for data consistency with such efficient behavior that only include observed firm demand and supply data. We illustrate our methodology by examining the cost efficiency of research programs in Economics and Business Management faculties of Dutch universities. This application shows that the proposed methodology may entail robust conclusions regarding cost efficiency differences between universities within specific specialization areas, even when using shadow prices to evaluate the different inputs.

Download Info

If 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.
File URL: http://ftp.iza.org/dp2319.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2319.

as in new window
Length: 32 pages
Date of creation: Sep 2006
Date of revision:
Publication status: published in: Operations Research, 2008, 56(1), 204-221
Handle: RePEc:iza:izadps:dp2319

Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information:
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:

Related research

Keywords: nonparametric tests; production behavior; multi-product firms; input externalities; joint input use; economies of scope;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Afriat, Sidney N, 1972. "Efficiency Estimation of Production Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 568-98, October.
  2. SIMAR, Léopold & WILSON, Paul, 1995. "Sensitivity Analysis to Efficiency Scores : How to Bootstrap in Nonparametric Frontier Models," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1995043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2007. "The Collective Model of Household Consumption: A Nonparametric Characterization," Econometrica, Econometric Society, Econometric Society, vol. 75(2), pages 553-574, 03.
  4. Peter Bogetoft, 1996. "DEA on Relaxed Convexity Assumptions," Management Science, INFORMS, INFORMS, vol. 42(3), pages 457-465, March.
  5. Niels Christian Petersen, 1990. "Data Envelopment Analysis on a Relaxed Set of Assumptions," Management Science, INFORMS, INFORMS, vol. 36(3), pages 305-314, March.
  6. Kim, Kwansoo & Barham, Bradford L. & Chavas, Jean-Paul & Foltz, Jeremy D., 2005. "Research and Development at U.S. Research Universities: An Analysis of Scope Economies," 2005 Annual meeting, July 24-27, Providence, RI, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 19147, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Laurens Cherchye & Piet Vanden Abeele, 2002. "On Research Efficiency: A Micro-Analysis of Dutch University Research in Economics and Business Management," Public Economics Working Paper Series, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics ces0206, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
  8. Varian, Hal R, 1984. "The Nonparametric Approach to Production Analysis," Econometrica, Econometric Society, Econometric Society, vol. 52(3), pages 579-97, May.
  9. Timo Kuosmanen & Laurens Cherchye & Timo Sipiläinen, 2003. "The Law of One Price in Data Envelopment Analysis: Restricting Weight Flexibility Across Firms," Microeconomics, EconWPA 0312006, EconWPA, revised 18 Dec 2003.
  10. Hanoch, Giora & Rothschild, Michael, 1972. "Testing the Assumptions of Production Theory: A Nonparametric Approach," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 80(2), pages 256-75, March-Apr.
  11. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, Elsevier, vol. 2(6), pages 429-444, November.
  12. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521497695.
  13. Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, Elsevier, vol. 46(1-2), pages 125-140.
  14. Cazals, Catherine & Florens, Jean-Pierre & Simar, Leopold, 2002. "Nonparametric frontier estimation: a robust approach," Journal of Econometrics, Elsevier, Elsevier, vol. 106(1), pages 1-25, January.
  15. Adonis Yatchew, 1998. "Nonparametric Regression Techniques in Economics," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 669-721, June.
  16. Banker, Rajiv D & Maindiratta, Ajay, 1988. "Nonparametric Analysis of Technical and Allocative Efficiencies in Production," Econometrica, Econometric Society, Econometric Society, vol. 56(6), pages 1315-32, November.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2010. "An Afriat theorem for the collective model of household consumption," ULB Institutional Repository 2013/131711, ULB -- Universite Libre de Bruxelles.
  2. Fabrice Talla Nobibon & Laurens Cherchye & Bram De Rock & Jeroen Sabbe & Frits Spieksma, 2011. "Heuristics for Deciding Collectively Rational Consumption Behavior," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 38(2), pages 173-204, August.
  3. De Witte, Kristof & Rogge, Nicky & Cherchye, Laurens & Van Puyenbroeck, Tom, 2012. "Economies of scope in research and teaching: a non-parametric investigation," Working Papers, Hogeschool-Universiteit Brussel, Faculteit Economie en Management 2012/14, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  4. Carvalho, Pedro & Marques, Rui Cunha, 2014. "Computing economies of vertical integration, economies of scope and economies of scale using partial frontier nonparametric methods," European Journal of Operational Research, Elsevier, Elsevier, vol. 234(1), pages 292-307.
  5. Laurens Cherchye & Bram De Rock, 2013. "The Economic Meaning of Data Envelopment Analysis: a "Behavioral" Perspective," Working Papers ECARES, ULB -- Universite Libre de Bruxelles 2013/137577, ULB -- Universite Libre de Bruxelles.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp2319. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.