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Modeling Output Gains And Earnings' Gains

Author

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  • HIROFUMI FUKUYAMA

    (Faculty of Commerce, Fukuoka University, Nanakuma, Jonan-Ku, Fukuoka 814-0180, Japan)

  • WILLIAM L. WEBER

    (Department of Economics, Southeast Missouri State University, Cape Girardeau, MO 63701, USA)

Abstract

In this paper, we examine the potential gains in physical outputs or earnings on outputs from an optimal reallocation of inputs. When some decision-making units (DMUs) face higher input prices than other DMUs, the Farrell decomposition of cost efficiency can potentially indicate that a firm with lower overall costs of production is less efficient than a firm that uses fewer physical inputs, but has higher costs. We extend our gain functions accounting for cases where DMUs face different input prices. An empirical illustration of our method is provided using data on Japanese banks operating during 2000–2003.

Suggested Citation

  • Hirofumi Fukuyama & William L. Weber, 2005. "Modeling Output Gains And Earnings' Gains," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 4(03), pages 433-454.
    • Handle: RePEc:wsi:ijitdm:v:04:y:2005:i:03:n:s0219622005001659
    DOI: 10.1142/S0219622005001659
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    References listed on IDEAS

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    1. Pagan,Adrian & Ullah,Aman, 1999. "Nonparametric Econometrics," Cambridge Books, Cambridge University Press, number 9780521355643.
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    Cited by:

    1. Fukuyama, Hirofumi & Matousek, Roman & Tzeremes, Nickolaos G., 2023. "Estimating the degree of firms’ input market power via data envelopment analysis: Evidence from the global biotechnology and pharmaceutical industry," European Journal of Operational Research, Elsevier, vol. 305(2), pages 946-960.

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