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Introducing microeconomic foundation in DEA: the average-based approach

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  • Vitor Miguel Ribeiro
  • Celeste Varum
  • Ana Dias Daniel

Abstract

Although recent developments focused on the multi-stage and multilevel data envelopment analysis (DEA) exhibit a high degree of mathematical sophistication, they are also characterized by the absence of a microeconomic foundation. This study proposes a novel approach called average-based DEA, which is conceived to overcome such a concern through the application of the Spence distortion principle to the hierarchy of a system. Theoretical and empirical results demonstrate that the proposed methodology reduces the distortion of efficiency scores observed in alternative multilevel extensions.

Suggested Citation

  • Vitor Miguel Ribeiro & Celeste Varum & Ana Dias Daniel, 2020. "Introducing microeconomic foundation in DEA: the average-based approach," Spatial Economic Analysis, Taylor & Francis Journals, vol. 15(2), pages 145-164, April.
  • Handle: RePEc:taf:specan:v:15:y:2020:i:2:p:145-164
    DOI: 10.1080/17421772.2020.1701701
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    Cited by:

    1. Ogunrinde, Olawale & Shittu, Ekundayo, 2023. "Efficiency and productivity of renewable energy technologies: Evidence from U.S. investor-owned utilities across regional markets," Utilities Policy, Elsevier, vol. 82(C).

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