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Profit, Directional Distance Functions, and Nerlovian Efficiency

Author

Listed:
  • R. G. Chambers

    (University of Maryland at College Park)

  • Y. Chung

    (Southern Illinois University at Carbondale)

  • R. Färe

    (Oregon State University)

Abstract

The directional technology distance function is introduced, given an interpretation as a min-max, and compared with other functional representations of the technology including the Shephard input and output distance functions and the McFadden gauge function. A dual correspondence is developed between the directional technology distance function and the profit function, and it is shown that all previous dual correspondences are special cases of this correspondence. We then show how Nerlovian (profit-based) efficiency measures can be computed using the directional technology distance function.

Suggested Citation

  • R. G. Chambers & Y. Chung & R. Färe, 1998. "Profit, Directional Distance Functions, and Nerlovian Efficiency," Journal of Optimization Theory and Applications, Springer, vol. 98(2), pages 351-364, August.
  • Handle: RePEc:spr:joptap:v:98:y:1998:i:2:d:10.1023_a:1022637501082
    DOI: 10.1023/A:1022637501082
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    References listed on IDEAS

    as
    1. W. Briec, 1997. "A Graph-Type Extension of Farrell Technical Efficiency Measure," Journal of Productivity Analysis, Springer, vol. 8(1), pages 95-110, March.
    2. Luenberger, David G., 1992. "Benefit functions and duality," Journal of Mathematical Economics, Elsevier, vol. 21(5), pages 461-481.
    3. Lau, Lawrence J & Yotopoulos, Pan A, 1971. "A Test for Relative Efficiency and Application to Indian Agriculture," American Economic Review, American Economic Association, vol. 61(1), pages 94-109, March.
    4. Fuss, Melvyn & McFadden, Daniel (ed.), 1978. "Production Economics: A Dual Approach to Theory and Applications," Elsevier Monographs, Elsevier, edition 1, number 9780444850133.
    5. Blackorby, Charles & Donaldson, David, 1980. "A Theoretical Treatment of Indices of Absolute Inequality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 107-136, February.
    6. Fuss, Melvyn & McFadden, Daniel, 1978. "Production Economics: A Dual Approach to Theory and Applications (I): The Theory of Production," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, volume 1, number fuss1978.
    7. Chambers, Robert G. & Chung, Yangho & Fare, Rolf, 1996. "Benefit and Distance Functions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 407-419, August.
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