Are Trolley Buses in Athens and Piraeus technically efficient?

Reliable measures of technical efficiency are of great interest because they can assist in addressing important issues. For instance, inefficient operation of firms - in the sense that if a firm is inefficient it does not produce at minimum cost - could lead to higher prices which could drive costumers to substitute away toward some other product or service. The purpose of this paper is the estimation of technical efficiency of Trolley Buses of Athens & Piraeus Area (T.B.A.P.A.), for each one of its twenty (20) lines for the year 2003. We apply the methodological framework of Stochastic Frontier Analysis (S.F.A.), by using the Cobb- Douglas specification of the production function. The dependent variable is the total kilometers that are covered by the vehicles of each line, while the independent variables include the fleet of the vehicles used, labor expanded and energy expanded. The data set consists of the monthly observations of the twenty (20) lines of the APTB. The results are compared to those from Data Envelopment Analysis (D.E.A.), a particularly widely used approach for efficiency measurement in the literature. Findings suggest that most lines were highly efficient, since technical efficiency ranged between 97% and 100%. The results obtained by means of the SFA approach are, in general terms, consistent with the DEA findings, despite the fact that DEA usually cannot discriminate between inefficiency and noise and tends to provide overestimated results.