Technical and Economic Efficiency Measures under Short Run Profit Maximizing Behavior
The duality between measures of economic and technical efficiency has been extensively studied in the productive efficiency analysis. This duality ensures a meaningful interpretation of technical efficiency as economic efficiency evaluated at the most favourable shadow prices. This paper concentrates on economic efficiency as short run profit efficiency. We first argue that a modified version of Varian's goodness-of-it measure provides an appropriate economic efficiency measure in that context. Next, we show that a variant of the McFadden gauge function provides a natural dual efficiency measure for this short run profit efficiency measure. In particular we establish two attractive properties of that technical efficiency measure : (i) It can be interpreted as Varian's profit efficiency measure evaluated at shadow prices ; (ii) it provides an upper bound for profit efficiency
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"Short- and Long-Run Credit Constraints in French Agriculture: A Directional Distance Function Framework Using Expenditure-Constrained Profit Functions,"
2005-ECO-02, IESEG School of Management.
- Stéphane Blancard & Jean-Philippe Boussemart & Walter Briec & Kristiaan Kerstens, 2006. "Short- and Long-Run Credit Constraints in French Agriculture: A Directional Distance Function Framework Using Expenditure-Constrained Profit Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(2), pages 351-364.
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