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Technical Efficiency Measures on DEA and FDH : A Reconsideration of the Axiomatic Literature

Author

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  • KERSTENs, Kris

    (Faculteit ETEW, K.U. Brussel)

  • VANDEN EECKAUT, Philippe

    (CORE, Université catholique de Louvain, Louvain-la-Neuve, B-1348 Belgium.)

Abstract

The aim of this paper is to evaluate both radial and nonradial measures of technical efficiency based on two popular non-parametric reference technologies, known as Data Envelopment Analysis (DEA) and the Free Disposal Hull (FDH). In addition to the traditional radial measurement, a series of alternative technical efficiency measures proposed in the theoretical literature are presented and discussed. In particular, the axioms satisfied by these efficiency measures are summarized and some of these properties are illustrated using numerical examples. Another property is proposed guaranteeing the insensitivity of the efficiency measure ,to the number of dimensions in the analysis. The latter is especially important in applied work. Furthermore, additional arguments on e.g., the cost interpretation of these efficiency measures are examined.

Suggested Citation

  • KERSTENs, Kris & VANDEN EECKAUT, Philippe, 1995. "Technical Efficiency Measures on DEA and FDH : A Reconsideration of the Axiomatic Literature," CORE Discussion Papers 1995013, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:1995013
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    File URL: https://uclouvain.be/en/research-institutes/immaq/core/dp-1995.html
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    References listed on IDEAS

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    1. Luce, R Duncan & Krantz, David H, 1971. "Conditional Expected Utility," Econometrica, Econometric Society, vol. 39(2), pages 253-271, March.
    2. Costis Skiadas, 1991. "Conditioning and Aggregation of Preferences," Discussion Papers 1010, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Fishburn, Peter C, 1973. "A Mixture-Set Axiomatization of Conditional Subjective Expected Utility," Econometrica, Econometric Society, vol. 41(1), pages 1-25, January.
    4. F J Anscombe & R J Aumann, 2000. "A Definition of Subjective Probability," Levine's Working Paper Archive 7591, David K. Levine.
    5. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
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    Cited by:

    1. Cherchye, Laurens & Van Puyenbroeck, Tom, 2001. "Product mixes as objects of choice in non-parametric efficiency measurement," European Journal of Operational Research, Elsevier, vol. 132(2), pages 287-295, July.
    2. Borger, Bruno De & Ferrier, Gary D. & Kerstens, Kristiaan, 1998. "The choice of a technical efficiency measure on the free disposal hull reference technology: A comparison using US banking data," European Journal of Operational Research, Elsevier, vol. 105(3), pages 427-446, March.
    3. Dervaux, Benoît & Kerstens, Kristiaan & Vanden Eeckaut, Philippe, 1998. "Radial and nonradial static efficiency decompositions: a focus on congestion measurement," Transportation Research Part B: Methodological, Elsevier, vol. 32(5), pages 299-312, June.
    4. McKillop, D. G. & Glass, J. C. & Ferguson, C., 2002. "Investigating the cost performance of UK credit unions using radial and non-radial efficiency measures," Journal of Banking & Finance, Elsevier, vol. 26(8), pages 1563-1591, August.
    5. Kerstens, K., 1996. "Technical efficiency measurement and explanation of French urban transit companies," Transportation Research Part A: Policy and Practice, Elsevier, vol. 30(6), pages 431-452, November.
    6. Kristiaan Kerstens & Philippe Vanden Eeckaut, 1999. "A new criterion for technical efficiency measures: non-monotonicity across dimensions axioms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(1), pages 45-59.

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