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Inefficiency

We introduce an ordinal model of efficiency measurement. Our primitive is a notion of efficiency that is comparative, but not cardinal or absolute. In this framework, we postulate axioms that we believe an ordinal efficiency measure should satisfy. Primary among these are choice consistency and planning consistency, which guide the measurement of efficiency in a firm with access to multiple technologies. Other axioms include symmetry, which states that the names of commodities do not matter, scale-invariance, which says that units of measurement of commodities does not matter, and strong monotonicity, which states that efficiency should decrease if the inputs and outputs remain static when the technology becomes unambiguously more efficient. These axioms characterize a unique ordinal efficiency measure which is represented by the coefficient of resource utilization. By replacing symmetry (the weakest of our axioms) with a very mild continuity condition, we obtain a family of path-based measures.

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File URL: http://hevra.haifa.ac.il/econ/wp_files/wp201114.pdf
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Paper provided by University of Haifa, Department of Economics in its series Working Papers with number WP2011/14.

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Length: 27
Date of creation:
Date of revision: 30 Nov 2011
Handle: RePEc:haf:huedwp:wp201114
Contact details of provider: Postal: Mount Carmel, Haifa, 31905, Israel
Phone: 972-4-8240086
Fax: 972-4-8240059
Web page: http://hevra.haifa.ac.il/econ/en/

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  1. Bruno Leclerc & Bernard Monjardet, 2010. "Aggregation and residuation," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00504982, HAL.
  2. R. Russell & William Schworm, 2009. "Axiomatic foundations of efficiency measurement on data-generated technologies," Journal of Productivity Analysis, Springer, vol. 31(2), pages 77-86, April.
  3. Christopher Chambers & Alan Miller, 2011. "Rules for aggregating information," Social Choice and Welfare, Springer, vol. 36(1), pages 75-82, January.
  4. Dinko Dimitrov & Thierry Marchant & Debasis Mishra, 2009. "Separability and aggregation of equivalence relations," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 09-06, Indian Statistical Institute, New Delhi, India.
  5. R. Russell & William Schworm, 2011. "Properties of inefficiency indexes on 〈input, output〉 space," Journal of Productivity Analysis, Springer, vol. 36(2), pages 143-156, October.
  6. Miller, Alan D., 2008. "Group identification," Games and Economic Behavior, Elsevier, vol. 63(1), pages 188-202, May.
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