Analysis of product efficiency in the Korean automobile market from a consumer’s perspective
A product is called technically inefficient when it has higher price and/or lower quality than others. Technical inefficiency of product has been conceptualized since Lancaster (1966), and empirically measured by many researchers, for example, Fernandez-Castro and Smith (2002) and Lee et al. (2005) among others. If we know further the information about structure of utility function, allocative inefficiency can also be measured. Even though a product is technically efficient with highest quality together with lowest price, it could not be chosen in the market, if it cannot match the preference structure of consumers, i.e. it is allocatively inefficient. This study poses a conceptual and methodological framework to measure technical and allocative efficiency at the product level considering consumer’s choice, which comprises the overall efficiency. Empirically we combine Data Envelopment Analysis (DEA) and discrete choice model to measure the level of inefficiencies. The suggested framework is applied to the Korean automobile market. The relationship between the level of efficiency and market performance in terms of market share is discussed.
(This abstract was borrowed from another version of this item.)
Volume (Year): 38 (2010)
Issue (Month): 1 (February)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/econometrics/journal/181/PS2|
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.:
- 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.
- DE BORGER, Bruno & KERSTENS, Kristiaan, 1994.
"Cost efficiency of Belgian local governments: A comparative analysis of FDH, DEA and econometric approaches,"
SESO Working Papers
1994002, University of Antwerp, Faculty of Applied Economics.
- De Borger, Bruno & Kerstens, Kristiaan, 1996. "Cost efficiency of Belgian local governments: A comparative analysis of FDH, DEA, and econometric approaches," Regional Science and Urban Economics, Elsevier, vol. 26(2), pages 145-170, April.
- Pekka Korhonen & Mikko Syrjänen, 2005. "On the Interpretation of Value Efficiency," Journal of Productivity Analysis, Springer, vol. 24(2), pages 197-201, October.
- M. Halme & T. Joro & P. Korhonen & S. Salo & J. Wallenius, 1998. "Value Efficiency Analysis for Incorporating Preference Information in Data Envelopment Analysis," Working Papers ir98054, International Institute for Applied Systems Analysis.
- Eduardo Ley & Mark F.J. Steel, 1995.
"On the Estimation of Demand Systems Through Consumption Efficiency,"
9503001, EconWPA, revised 22 Feb 1996.
- Ley, Eduardo & Steel, Mark F J, 1996. "On the Estimation of Demand Systems through Consumption Efficiency," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 539-43, August.
- Train,Kenneth E., 2009.
"Discrete Choice Methods with Simulation,"
Cambridge University Press, number 9780521766555, November.
- McFadden, Daniel, 1974. "The measurement of urban travel demand," Journal of Public Economics, Elsevier, vol. 3(4), pages 303-328, November.
- Merja Halme & Tarja Joro & Pekka Korhonen & Seppo Salo & Jyrki Wallenius, 1999. "A Value Efficiency Approach to Incorporating Preference Information in Data Envelopment Analysis," Management Science, INFORMS, vol. 45(1), pages 103-115, January.
- Pekka Korhonen & Margareta Soismaa & Aapo Siljamäki, 2002. "On the Use of Value Efficiency Analysis and Some Further Developments," Journal of Productivity Analysis, Springer, vol. 17(1), pages 49-64, January.
- Christos Papahristodoulou, 1997. "A DEA model to evaluate car efficiency," Applied Economics, Taylor & Francis Journals, vol. 29(11), pages 1493-1508.
- Wojcik, Charlotte, 2000. "Alternative models of demand for automobiles," Economics Letters, Elsevier, vol. 68(2), pages 113-118, August.
- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
- Lee, Jeongdong & Repkine, Alexandre & Hwang, Seogwon & Kim, Taiyoo, 2004. "Estimating Consumers’ Willingness to Pay for the Individual Quality Attributes with DEA," MPRA Paper 7848, University Library of Munich, Germany.
- repec:cor:louvrp:-571 is not listed on IDEAS
- James Levinsohn & Steven Berry & Ariel Pakes, 1999. "Voluntary Export Restraints on Automobiles: Evaluating a Trade Policy," American Economic Review, American Economic Association, vol. 89(3), pages 400-430, June.
- Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132.
- Wojcik, Charlotte, 2001. "Learning by Consumers in the Demand for Japanese Cars," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 94-107, February.
- Aviv Nevo, 2000. "A Practitioner's Guide to Estimation of Random-Coefficients Logit Models of Demand," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 513-548, December.
- Ulrich Kaiser, 2002.
"The Effects of Website Provision on the Demand for German Women's Magazines,"
NBER Working Papers
8806, National Bureau of Economic Research, Inc.
- Kaiser, Ulrich, 2001. "The effects of website provision on the demand for German women's magazines," ZEW Discussion Papers 01-69, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
When requesting a correction, please mention this item's handle: RePEc:spr:empeco:v:38:y:2010:i:1:p:119-137. 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: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.