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Multi-criteria production theory: convexity propositions and reasonable axioms

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  • Harald Dyckhoff

    (Operations Management, RWTH Aachen University)

Abstract

Multi-criteria production theory is a generalization of traditional production theories that can be utilized to expand knowledge on the theory and practice of non-financial performance analysis. Based on decision theory, its main idea is the capability of strictly distinguishing technologically determined inputs and outputs of a production system’s activity from its desired or undesired impacts on artificial or natural environments in the form of generalized benefits and costs. For the special cases of linear and of monotonic multiple cost and benefit functions, a recent paper in this journal proves first main propositions and applies them to some topics often discussed in the literature. This paper extends these results. General theorems for convex production possibility sets, convex cost functions, and concave benefit functions are proven, and it is shown that some technological assumptions, which are usual in economics and data envelopment analysis, particularly those on strong disposability, are unessential for efficiency measurement or even unrealistic, whereas a newly introduced axiom of value disposability may be reasonable.

Suggested Citation

  • Harald Dyckhoff, 2019. "Multi-criteria production theory: convexity propositions and reasonable axioms," Journal of Business Economics, Springer, vol. 89(6), pages 719-735, August.
    • Handle: RePEc:spr:jbecon:v:89:y:2019:i:6:d:10.1007_s11573-019-00939-0
    DOI: 10.1007/s11573-019-00939-0
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    References listed on IDEAS

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    Cited by:

    1. Harald Dyckhoff & Rainer Souren, 2023. "Are important phenomena of joint production still being neglected by economic theory? A review of recent literature," Journal of Business Economics, Springer, vol. 93(6), pages 1015-1053, August.
    2. Dyckhoff, Harald & Souren, Rainer, 2022. "Integrating multiple criteria decision analysis and production theory for performance evaluation: Framework and review," European Journal of Operational Research, Elsevier, vol. 297(3), pages 795-816.
    3. Harald Dyckhoff, 2023. "Proper modelling of industrial production systems with unintended outputs: a different perspective," Journal of Productivity Analysis, Springer, vol. 59(2), pages 173-188, April.

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    More about this item

    Keywords

    Multi-criteria decision making; Production theory; Performance analysis; Convexity properties; Efficient frontier; Disposability assumption;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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