Multi-output Profit Efficiency and Directional Distance Functions
We extend a recently developed DEA methodology for cost efficiency analysis towards profit efficiency settings. This establishes a novel DEA toolkit for profit efficiency assessments in situations with multiple inputs and multiple outputs. A distinguishing feature of our methodology is that it assumes output-specific production technologies. In addition, the methodology accounts for the use of joint inputs, and explicitly includes information on the allocation of inputs to individual outputs. We also establish a dual relationship between our multi-output profit inefficiency measure and a technical inefficiency measure that takes the form of a multi-output directional distance function. Finally, we demonstrate the empirical usefulness of our methodology by an empirical application to a large service company.
(This abstract was borrowed from another version of this item.)
|Date of creation:||Nov 2014|
|Publication status:||Published by:|
|Contact details of provider:|| Postal: Av. F.D., Roosevelt, 39, 1050 Bruxelles|
Phone: (32 2) 650 30 75
Fax: (32 2) 650 44 75
Web page: http://difusion.ulb.ac.be
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Juo, Jia-Ching & Fu, Tsu-Tan & Yu, Ming-Miin, 2012. "Non-oriented slack-based decompositions of profit change with an application to Taiwanese banking," Omega, Elsevier, vol. 40(5), pages 550-561.
- Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2008.
"Analyzing Cost-Efficient Production Behavior Under Economies of Scope: A Nonparametric Methodology,"
INFORMS, vol. 56(1), pages 204-221, February.
- Cherchye, Laurens & De Rock, Bram & Vermeulen, Frederic, 2006. "Analyzing Cost Efficient Production Behavior Under Economies of Scope: A Nonparametric Methodology," IZA Discussion Papers 2319, Institute for the Study of Labor (IZA).
- Cherchye, L.J.H. & de Rock, B. & Vermeulen, F.M.P., 2006. "Analyzing Cost Efficient Production Behavior Under Economies of Scope : A Nonparametric Methodology," Discussion Paper 2006-81, Tilburg University, Center for Economic Research.
- Bram De Rock & Laurens Cherchye & Frederic Vermeulen, 2008. "Analyzing cost efficient production behavior under economies of scope: a nonparametric methodology," ULB Institutional Repository 2013/7536, ULB -- Universite Libre de Bruxelles.
- Tone, Kaoru & Sahoo, Biresh K., 2003. "Scale, indivisibilities and production function in data envelopment analysis," International Journal of Production Economics, Elsevier, vol. 84(2), pages 165-192, May.
- Du, Juan & Cook, Wade D. & Liang, Liang & Zhu, Joe, 2014. "Fixed cost and resource allocation based on DEA cross-efficiency," European Journal of Operational Research, Elsevier, vol. 235(1), pages 206-214.
- Laurens Cherchye & Bram De Rock & Bart Dierynck & Filip Roodhooft & Jeroen Sabbe, 2013.
"Opening the “Black Box” of Efficiency Measurement: Input Allocation in Multioutput Settings,"
INFORMS, vol. 61(5), pages 1148-1165, October.
- Laurens CHERCHYE & Bram DE ROCK & Bart DIERYNCK & Filip ROODHOOFT & Jeroen SABBE, 2011. "Opening the 'black box' of efficiency measurement: input allocation in multi-output settings," Working Papers Department of Economics ces11.10, KU Leuven, Faculty of Economics and Business, Department of Economics.
- Laurens Cherchye & Bram De Rock & Bart Dierynck & Filip Roodhooft & Jeroen Sabbe, 2013. "Opening the Black Box of Efficiency Measurement: Input Allocation in Multi-Output Settings," ULB Institutional Repository 2013/151675, ULB -- Universite Libre de Bruxelles.
- Cherchye, L. & De Rock, B. & Dierynck, B. & Roodhooft, F. & Sabbe, J., 2011. "Opening the ‘Black box’ of efficiency measurement: Input allocation in Multi-output settings," Vlerick Leuven Gent Management School Working Paper Series 2011-13, Vlerick Leuven Gent Management School.
- Beasley, J. E., 2003. "Allocating fixed costs and resources via data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 147(1), pages 198-216, May.
- Boussemart, Jean-Philippe & Crainich, David & Leleu, Hervé, 2015.
"A decomposition of profit loss under output price uncertainty,"
European Journal of Operational Research,
Elsevier, vol. 243(3), pages 1016-1027.
- Jean-Philippe Boussemart & David Crainich & Herve Leleu, 2015. "A decomposition of profit loss under output price uncertainty," Post-Print hal-01526027, HAL.
- Hanoch, Giora & Rothschild, Michael, 1972. "Testing the Assumptions of Production Theory: A Nonparametric Approach," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 256-275, March-Apr.
- Afriat, Sidney N, 1972. "Efficiency Estimation of Production Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 568-598, October.
- Laurens Cherchye & Thomas Demuynck & Bram Rock & Kristof Witte, 2014.
"Non‐parametric Analysis of Multi‐output Production with Joint Inputs,"
Royal Economic Society, vol. 124(577), pages 735-775, June.
- Laurens CHERCHYE & Thomas DEMUYNCK & Bram DE ROCK & Kristof DE WITTE, 2011. "Nonparametric analysis of multi-output production with joint inputs," Working Papers Department of Economics ces11.35, KU Leuven, Faculty of Economics and Business, Department of Economics.
- Laurens Cherchye & Thomas Demuynck & Bram De Rock & Kristof K. De Witte, 2014. "Nonparametric analysis of multi-output production with joint inputs," ULB Institutional Repository 2013/252231, ULB -- Universite Libre de Bruxelles.
- Leleu, Hervé, 2013.
"Inner and outer approximations of technology: A shadow profit approach,"
Elsevier, vol. 41(5), pages 868-871.
- Hervé Leleu, 2012. "Inner and Outer Approximations of Technology: A Shadow Profit Approach," Working Papers 2012-ECO-06, IESEG School of Management.
- H. Leleu, 2013. "Inner and outer approximations of technology: a shadow profit approach," Post-Print hal-00798547, HAL.
- Laurens Cherchye & Willem Moesen & Nicky Rogge & Tom Puyenbroeck, 2007. "An Introduction to ‘Benefit of the Doubt’ Composite Indicators," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 82(1), pages 111-145, May.
- Cook, Wade D. & Hababou, Moez, 2001. "Sales performance measurement in bank branches," Omega, Elsevier, vol. 29(4), pages 299-307, August.
- Fried, Harold O. & Lovell, C. A. Knox & Schmidt, Shelton S. (ed.), 2008. "The Measurement of Productive Efficiency and Productivity Growth," OUP Catalogue, Oxford University Press, number 9780195183528.
- Hirofumi Fukuyama & William L. Weber, 2008. "Profit inefficiency of Japanese securities firm," Journal of Applied Economics, Universidad del CEMA, vol. 11, pages 281-303, November.
- John Salerian & Chris Chan, 2005. "Restricting Multiple-Output Multiple-Input DEA Models by Disaggregating the Output–Input Vector," Journal of Productivity Analysis, Springer, vol. 24(1), pages 5-29, September.
- Benjamin Hampf & Jens J. KrÃ¼ger, 2015. "Optimal Directions for Directional Distance Functions: An Exploration of Potential Reductions of Greenhouse Gases," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(3), pages 920-938.
- Cook, Wade D. & Seiford, Larry M., 2009. "Data envelopment analysis (DEA) - Thirty years on," European Journal of Operational Research, Elsevier, vol. 192(1), pages 1-17, January.
- R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
- Cherchye, Laurens & Rock, Bram De & Walheer, Barnabé, 2015. "Multi-output efficiency with good and bad outputs," European Journal of Operational Research, Elsevier, vol. 240(3), pages 872-881.
- Fare, Rolf & Grosskopf, Shawna, 2000. "Network DEA," Socio-Economic Planning Sciences, Elsevier, vol. 34(1), pages 35-49, March.
- Sahoo, Biresh K. & Tone, Kaoru, 2013. "Non-parametric measurement of economies of scale and scope in non-competitive environment with price uncertainty," Omega, Elsevier, vol. 41(1), pages 97-111.
- Yu, Ming-Miin & Chern, Ching-Chin & Hsiao, Bo, 2013. "Human resource rightsizing using centralized data envelopment analysis: Evidence from Taiwan's Airports," Omega, Elsevier, vol. 41(1), pages 119-130.
- Li, Yongjun & Yang, Feng & Liang, Liang & Hua, Zhongsheng, 2009. "Allocating the fixed cost as a complement of other cost inputs: A DEA approach," European Journal of Operational Research, Elsevier, vol. 197(1), pages 389-401, August.
- Varian, Hal R, 1984. "The Nonparametric Approach to Production Analysis," Econometrica, Econometric Society, vol. 52(3), pages 579-597, May.
- Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
- Rolf Färe & Shawna Grosskopf, 2000. "Theory and Application of Directional Distance Functions," Journal of Productivity Analysis, Springer, vol. 13(2), pages 93-103, March.
- Cherchye, Laurens & Van Puyenbroeck, Tom, 2007.
"Profit efficiency analysis under limited information with an application to German farm types,"
Elsevier, vol. 35(3), pages 335-349, June.
- Laurens Cherchye & Tom Van Puyenbroeck, 2002. "Profit Efficiency Analysis Under Limited Information. With an Application to German Farm Types," Public Economics Working Paper Series ces0202, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
- Camanho, A.S. & Dyson, R.G., 2008. "A generalisation of the Farrell cost efficiency measure applicable to non-fully competitive settings," Omega, Elsevier, vol. 36(1), pages 147-162, February.
When requesting a correction, please mention this item's handle: RePEc:eca:wpaper:2013/177286. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.