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Estimating scale economies in non-convex production models

Author

Listed:
  • Giovanni Cesaroni
  • Kristiaan Kerstens

    (Department of Economics - IESEG School of Managementg, LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - ULCO - Université du Littoral Côte d'Opale - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Ignace van de Woestyne

    (Department of Economics - Hogeschool-Universiteit Brussel)

Abstract

The literature on nonparametric frontier technologies lacks a method for the measurement of scale economies in non-convex settings. This paper proposes a general procedure which is based on the minimization of the ray average cost and requires the solution of a single programming problem. Our approach allows for multiple optima to introduce the case of global sub-constant scale economies, and it also permits the estimation of scale economies at a local level. The empirical application investigates the role of replicability and the relationship between global and local indicators. It also points out the managerial implications for companies operating in the Italian public transit industry.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Giovanni Cesaroni & Kristiaan Kerstens & Ignace van de Woestyne, 2017. "Estimating scale economies in non-convex production models," Post-Print hal-01744569, HAL.
    • Handle: RePEc:hal:journl:hal-01744569
    DOI: 10.1057/s41274-016-0162-7
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    Cited by:

    1. Geraldo Souza & Eliane Gonçalves Gomes & Eliseu Roberto Alves, 2022. "Two-part fractional regression model with conditional FDH responses: an application to Brazilian agriculture," Annals of Operations Research, Springer, vol. 314(2), pages 393-409, July.
    2. Giovanni CESARONI & Kristiaan KERSTENS & Ignace VAN DE WOESTYNE, 2020. "The Shape of Ray Average Cost and Its Role in Multioutput Scale Economies: Some Generalisations," Working Papers 2020-EQM-03, IESEG School of Management.
    3. Yu, Ming-Miin & Lin, Chung-I & Chen, Kuan-Chen & Chen, Li-Hsueh, 2021. "Measuring Taiwanese bank performance: A two-system dynamic network data envelopment analysis approach," Omega, Elsevier, vol. 98(C).
    4. Kristiaan Kerstens & Ignace Van de Woestyne, 2021. "Cost functions are nonconvex in the outputs when the technology is nonconvex: convexification is not harmless," Annals of Operations Research, Springer, vol. 305(1), pages 81-106, October.

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