IDEAS home Printed from
   My bibliography  Save this paper

Comparing Efficiency Across Markets: An Extension and Critique of the Zhang and Bartels (1998) Methodology


  • Ruben Chumpitaz

    (IESEG School of Management, LEM-CNRS (UMR 8179))

  • Kristiaan Kerstens

    () (CNRS-LEM (UMR 8179), IESEG School of Management)

  • Nicholas Paparoidamis
  • Matthias Staat

    (University of Mannheim)


The use of non-parametric frontier methods for the evaluation of product market efficiency in heterogeneous markets seems to have gained some popularity recently. However, the statistical properties of these frontier estimators have been largely ignored. The main point is that nonparametric frontier estimators are biased and that the degree of bias depends on specific sample properties, most importantly sample size and number of dimensions of the model. To investigate the effect of this bias on comparing market efficiency, this contribution estimates the efficiency for several datasets for two main product categories. Following Zhang and Bartels (1998), these results comprise re-estimates for the larger samples limiting their size to that of the smaller samples when the model dimensions for different samples are identical. Furthermore, sample sizes are adjusted to mitigate the eventual differences in dimensions in specification. This allows comparing market efficiency for different markets on a more equal footing, since it reduces the bias effect to a minimum making the comparison of market efficiency possible. However, the article also points out the critical limitations of this Zhang and Bartels (1998) approach in certain respects. Apart from reporting these negative results, we also offer some suggestions for future work.

Suggested Citation

  • Ruben Chumpitaz & Kristiaan Kerstens & Nicholas Paparoidamis & Matthias Staat, 2010. "Comparing Efficiency Across Markets: An Extension and Critique of the Zhang and Bartels (1998) Methodology," Working Papers 2010-ECO-01, IESEG School of Management.
  • Handle: RePEc:ies:wpaper:e201001

    Download full text from publisher

    File URL:
    Download Restriction: no

    File URL:
    Download Restriction: no

    Other versions of this item:

    More about this item


    Market Efficiency; Heterogeneous Product Markets; Bias; Monte-Carlo Simulation;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ies:wpaper:e201001. 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: (Joao DA CUNHA). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.