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Integrating Consumer satisfaction into Productivity Indexes

Author

Listed:
  • Färe, Rolf

    (Department of Economics)

  • Grosskopf, Shawna

    (Department of Economics)

  • Roos, Pontus

    (Swedish Institute for Health Economics)

Abstract

The purpose of this paper is to include consumer satisfaction in the specification of productivity. We accomplish this by using Shephard’s preference indirect distance function to model technology subject to a utility target. The utility constraint allows us to include information on consumer satisfaction. The preference indirect distance function is then used to construct a Malmquist type of productivity index. As with the usual Malmquist productivity index, we can decompose productivity change into changes in technology and changes in efficiency. In addition, we show how to derive a quality change component. The technique is illustrated by an application to Swedish pharmacies.

Suggested Citation

  • Färe, Rolf & Grosskopf, Shawna & Roos, Pontus, 1996. "Integrating Consumer satisfaction into Productivity Indexes," SSE/EFI Working Paper Series in Economics and Finance 144, Stockholm School of Economics.
    • Handle: RePEc:hhs:hastef:0144
    as

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    More about this item

    Keywords

    Productivity; quality; consumer satisfaction; utility indirect input distance function; Malmquist index;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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