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On the Commensurability of Directional Distance Functions

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  • Salnykov, Mykhaylo
  • Zelenyuk, Valentin

Abstract

Shephard’s distance functions are widely used instruments for characterizing technology and for estimating efficiency in contemporary economic theory and practice. Recently, they have been generalized by the Luenberger shortage function, or Chambers-Chung-Färe directional distance function. In this study, we explore a very important property of an economic measure known as commensurability or independence of units of measurement up to scalar transformation. Our study discovers both negative and positive results for this property in the context of the directional distance function, which in turn helps us narrow down the most critical issue for this function in practice—the choice of direction of measurement.

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File URL: http://mpra.ub.uni-muenchen.de/7068/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 7068.

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Date of creation: 2005
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Handle: RePEc:pra:mprapa:7068

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Related research

Keywords: Directional distance functions; commensurability; efficiency;

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References

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  1. Luenberger David G., 1994. "Optimality and the Theory of Value," Journal of Economic Theory, Elsevier, vol. 63(2), pages 147-169, August.
  2. Chambers, Robert G. & Chung, Yangho & Fare, Rolf, 1996. "Benefit and Distance Functions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 407-419, August.
  3. Robert Russell, R., 1990. "Continuity of measures of technical efficiency," Journal of Economic Theory, Elsevier, vol. 51(2), pages 255-267, August.
  4. Fare, Rolf & Knox Lovell, C. A., 1978. "Measuring the technical efficiency of production," Journal of Economic Theory, Elsevier, vol. 19(1), pages 150-162, October.
  5. Bol, Georg, 1986. "On technical efficiency measures: A remark," Journal of Economic Theory, Elsevier, vol. 38(2), pages 380-385, April.
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Cited by:
  1. Cherchye, Laurens & Van Puyenbroeck, Tom, 2009. "Semi-radial technical efficiency measurement," European Journal of Operational Research, Elsevier, vol. 193(2), pages 616-625, March.
  2. Laurens Cherchye & Timo Kuosmanen & Hervé Leleu, 2010. "Technical and Economic Efficiency Measures Under Short Run Profit Maximizing Behavior," Recherches économiques de Louvain, De Boeck Université, vol. 76(2), pages 163-173.
  3. R. Robert Russell & William Schworm, 2009. "Axiomatic Foundations of Inefficiency Measurement on ," Discussion Papers 2009-07, School of Economics, The University of New South Wales.

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