Economic efficiency when prices are not fixed: disentangling quantity and price efficiency
This paper proposes an approach to compute cost efficiency in contexts where units can adjust input quantities and to some degree prices so that through their joint determination they can minimise the aggregate cost of the outputs they secure. The model developed is based on the data envelopment analysis (DEA) framework and can accommodate situations where the degree of influence over prices ranges from minimal to considerable. When units cannot influence prices at all the model proposed reduces to the standard cost efficiency DEA model for the case where prices are taken as exogenous. In addition to the cost efficiency model, we introduce an additive decomposition of potential cost savings into a quantity and a price component, based on Bennet indicators.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 47 (2014)
Issue (Month): C ()
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
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.:
- Johnson, Andrew L. & Ruggiero, John, 2011. "Allocative efficiency measurement with endogenous prices," Economics Letters, Elsevier, vol. 111(1), pages 81-83, April.
- Hervé Leleu, 2012.
"Inner and Outer Approximations of Technology: A Shadow Profit Approach,"
2012-ECO-06, IESEG School of Management.
- Leleu, Hervé, 2013. "Inner and outer approximations of technology: A shadow profit approach," Omega, Elsevier, vol. 41(5), pages 868-871.
- H. Leleu, 2013. "Inner and outer approximations of technology: a shadow profit approach," Post-Print hal-00798547, HAL.
- Subhash C. Ray & Lei Chen & Kankana Mukherjee, 2008.
"Input Price Variation Across Locations and a Generalized Measure of Cost Efficiency,"
2008-11, University of Connecticut, Department of Economics.
- Ray, Subhash C. & Chen, Lei & Mukherjee, Kankana, 2008. "Input price variation across locations and a generalized measure of cost efficiency," International Journal of Production Economics, Elsevier, vol. 116(2), pages 208-218, December.
- Robert G. Chambers, 2002. "Exact nonradial input, output, and productivity measurement," Economic Theory, Springer, vol. 20(4), pages 751-765.
- Kuosmanen, Timo & Kortelainen, Mika & Sipiläinen, Timo & Cherchye, Laurens, 2010. "Firm and industry level profit efficiency analysis using absolute and uniform shadow prices," European Journal of Operational Research, Elsevier, vol. 202(2), pages 584-594, April.
- E. Grifell-Tatjé & C.A.K. Lovell, 2000. "Cost and productivity," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 21(1), pages 19-30.
- Camanho, A.S. & Dyson, R.G., 2008. "A generalisation of the Farrell cost efficiency measure applicable to non-fully competitive settings," Omega, Elsevier, vol. 36(1), pages 147-162, February.
- Athanassopoulos, Antreas & Gounaris, Chrysostomos, 2001. "Assessing the technical and allocative efficiency of hospital operations in Greece and its resource allocation implications," European Journal of Operational Research, Elsevier, vol. 133(2), pages 416-431, January.
- E. Grifell-Tatjé & C. A. K. Lovell, 1999.
"Profits and Productivity,"
INFORMS, vol. 45(9), pages 1177-1193, September.
- Camanho, A. S. & Dyson, R. G., 2005. "Cost efficiency measurement with price uncertainty: a DEA application to bank branch assessments," European Journal of Operational Research, Elsevier, vol. 161(2), pages 432-446, March.
- Sahoo, Biresh K. & Tone, Kaoru, 2013. "Non-parametric measurement of economies of scale and scope in non-competitive environment with price uncertainty," Omega, Elsevier, vol. 41(1), pages 97-111.
- Cherchye, Laurens & Kuosmanen, Timo & Post, Thierry, 2002. "Non-parametric production analysis in non-competitive environments," International Journal of Production Economics, Elsevier, vol. 80(3), pages 279-294, December.
- Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
- Robert Russell, R., 1985. "Measures of technical efficiency," Journal of Economic Theory, Elsevier, vol. 35(1), pages 109-126, February.
- Timo Kuosmanen & Thierry Post, 2002. "Nonparametric Efficiency Analysis under Price Uncertainty: A First-Order Stochastic Dominance Approach," Journal of Productivity Analysis, Springer, vol. 17(3), pages 183-200, May.
- Thanassoulis, Emmanuel & Silva Portela, Maria C.A. & Graveney, Mike, 2012. "Estimating the scope for savings in referrals and drug prescription costs in the general Practice units of a UK primary care trust," European Journal of Operational Research, Elsevier, vol. 221(2), pages 432-444.
When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:47:y:2014:i:c:p:36-44. 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: (Zhang, Lei)
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.