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Eco-Efficiency Analysis of Consumer Durables Using Absolute Shadow Prices

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Author Info
Mika Kortelainen (University of Joensuu, Department of Business & Economics)
Timo Kuosmanen (Wageningen University, Environmental Economics & Natural Resources Group)

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Abstract

We develop a method for eco-efficiency analysis of consumer durables by utilizing Data Envelopment Analysis (DEA). In contrast to previous product efficiency studies, we consider the measurement problem from the perspective of a policy maker. The novel innovation of the paper is to measure efficiency in terms of absolute shadow prices that are optimized endogenously within the model to maximize efficiency of the good. Thus, the efficiency measure has a direct economic interpretation as a monetary loss due to inefficiency, expressed in some currency unit. The advantages as well as technical differences between the proposed approach and the traditional production-side methods are discussed in detail. We illustrate the approach by an application to eco-efficiency evaluation of Sport Utility Vehicles.

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Paper provided by EconWPA in its series Public Economics with number 0511022.

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Length: 39 pages
Date of creation: 29 Nov 2005
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Handle: RePEc:wpa:wuwppe:0511022

Note: Type of Document - pdf; pages: 39
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Web page: http://129.3.20.41

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Related research
Keywords: Activity Analysis; Data Envelopment Analysis (DEA); Environmental efficiency; Product evaluation; Sport Utility Vehicles (SUVs);

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Find related papers by JEL classification:
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
D62 - Microeconomics - - Welfare Economics - - - Externalities

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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.:
  1. Papahristodoulou, Christos, 1997. "A DEA Model to Evaluate Car Efficiency," Applied Economics, Taylor and Francis Journals, vol. 29(11), pages 1493-1508, November. [Downloadable!] (restricted)
  2. Fare, Rolf & Grosskopf, Shawna & Tyteca, Daniel, 1996. "An activity analysis model of the environmental performance of firms--application to fossil-fuel-fired electric utilities," Ecological Economics, Elsevier, vol. 18(2), pages 161-175, August. [Downloadable!] (restricted)
  3. Norman Keith Womer & Homeé F. E. Shroff & Thomas R. Gulledge & Kingsley E. Haynes, 2003. "Measuring efficiency with a linear economic model," Applied Economics, Taylor and Francis Journals, vol. 35(13), pages 1459-1467, September. [Downloadable!] (restricted)
  4. Fare, Rolf & Grosskopf, Shawna & Nelson, Julianne, 1990. "On Price Efficiency," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 709-20, August. [Downloadable!] (restricted)
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  5. Angel S. Fernandez-Castro & Peter C. Smith, 2002. "Lancaster's characteristics approach revisited: product selection using non-parametric methods," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(2), pages 83-91. [Downloadable!]
  6. Korhonen, Pekka J. & Luptacik, Mikulas, 2004. "Eco-efficiency analysis of power plants: An extension of data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 154(2), pages 437-446, April. [Downloadable!] (restricted)
  7. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132. [Downloadable!] (restricted)
  8. Timo Kuosmanen & Mika Kortelainen, 2004. "Data Envelopment Analysis in Environmental Valuation: Environmental Performance, Eco-efficiency and Cost-Benefit Analysis," Others 0409004, EconWPA. [Downloadable!]
  9. Dyson, R. G. & Allen, R. & Camanho, A. S. & Podinovski, V. V. & Sarrico, C. S. & Shale, E. A., 2001. "Pitfalls and protocols in DEA," European Journal of Operational Research, Elsevier, vol. 132(2), pages 245-259, July. [Downloadable!] (restricted)
  10. Matthias Staat & Hans H. Bauer & Maik Hammerschmidt, 2004. "Structuring Product-Markets: An Approach Based On Customer Value," Microeconomics 0401002, EconWPA. [Downloadable!]
  11. Kuosmanen, Timo & Cherchye, Laurens & Sipilainen, Timo, 2006. "The law of one price in data envelopment analysis: Restricting weight flexibility across firms," European Journal of Operational Research, Elsevier, vol. 170(3), pages 735-757, May. [Downloadable!] (restricted)
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  12. Doyle, JR & Green, RH, 1991. "Comparing products using data envelopment analysis," Omega, Elsevier, vol. 19(6), pages 631-638. [Downloadable!] (restricted)
  13. Kuosmanen, Timo & Kortelainen, Mika, 2007. "Valuing environmental factors in cost-benefit analysis using data envelopment analysis," Ecological Economics, Elsevier, vol. 62(1), pages 56-65, April. [Downloadable!] (restricted)
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  14. Mika Kortelainen & Timo Kuosmanen, 2004. "Measuring Eco-efficiency of Production: A Frontier Approach," Econometrics 0411006, EconWPA. [Downloadable!]
  15. Timo Kuosmanen & Mika Kortelainen & Timo Sipiläinen & Laurens Cherchye, 2005. "Firm and Industry Level Profit Efficiency Analysis Under Incomplete Price Data: A Nonparametric Approach based on Absolute and Uniform Shadow Prices," Microeconomics 0509011, EconWPA. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Timo Kuosmanen, 2006. "Valuing Environmental Factors in Cost-Benefit Analysis Using Data Envelopment Analysis," Working Papers 2006.96, Fondazione Eni Enrico Mattei. [Downloadable!]
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