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Addition and aggregative efficiency

Author

Listed:
  • Rolf Färe

    (Oregon State University
    University of Maryland)

  • Giannis Karagiannis

    (University of Macedonia)

Abstract

The aim of this paper is to relate the condition for cost subadditivity to aggregative efficiency. In particular, we verify that subadditivity of the cost function occurs when aggregate cost efficiency is not less than the cost efficiency of the average production unit. This provides a simple way of examining the potential of merging two or more firms and of making inference about the extent of industry concentration. It also provides a simple nonparametric test for subadditivity of the cost function.

Suggested Citation

  • Rolf Färe & Giannis Karagiannis, 2023. "Addition and aggregative efficiency," Journal of Productivity Analysis, Springer, vol. 59(3), pages 281-285, June.
    • Handle: RePEc:kap:jproda:v:59:y:2023:i:3:d:10.1007_s11123-023-00666-3
    DOI: 10.1007/s11123-023-00666-3
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    References listed on IDEAS

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