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Efficiency Measures for Industrial Organization

In: Benchmarking for Performance Evaluation

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  • Thijs ten Raa

    (Tilburg University)

Abstract

The aim of the paper was to measure the efficiency of an industry and to decompose it in firm efficiencies—which indicate how close firms approximate best practices—and an organization efficiency—which indicates the degree of optimality of the number of firms and their distribution. The latter component provides an efficiency measure for the industrial organization. Economies or diseconomies of scale and of scope play a big role in the determination of the optimal industrial organization and the consequent measurement of the efficiency of an observed industry. Different approaches to the modeling of scale economies will be reviewed. This paper shows in detail how the efficiency of an industrial organization can be measured as a gap between mean firm efficiency and overall industry efficiency. The analysis is extended to dynamic models to measure the role of entry and exit in the efficiency of the industrial organization.

Suggested Citation

  • Thijs ten Raa, 2015. "Efficiency Measures for Industrial Organization," Springer Books, in: Subhash C. Ray & Subal C. Kumbhakar & Pami Dua (ed.), Benchmarking for Performance Evaluation, edition 127, chapter 0, pages 221-250, Springer.
    • Handle: RePEc:spr:sprchp:978-81-322-2253-8_5
    DOI: 10.1007/978-81-322-2253-8_5
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    Cited by:

    1. Subhash C. Ray, 2014. "Branching Efficiency in Indian Banking: An Analysis of a Demand-Constrained Network," Working papers 2014-34, University of Connecticut, Department of Economics.
    2. Ray, Subhash, 2016. "Cost efficiency in an Indian bank branch network: A centralized resource allocation model," Omega, Elsevier, vol. 65(C), pages 69-81.
    3. Subhash C. Ray, 2011. "Nonparametric Measurement of Cost Efficiency of a Demand Constrained Branch Network: An Application to Indian Banking," Working papers 2011-03, University of Connecticut, Department of Economics.
    4. Subhash C. Ray & Shilpa Sethia, 2023. "A State-Level Resource Allocation Model for Emission Reduction and Efficiency Improvement in Thermal Power Plants," Working papers 2023-08, University of Connecticut, Department of Economics.

    More about this item

    Keywords

    Data Envelopment Analysis; Industrial Organization; Constant Return; Shadow Price; Variable Return;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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