Axiomatic Foundations of Inefficiency Measurement on Space
We provide an axiomatic foundation for efficiency measurement in the full space, referred to as “graph efficiency” measurement by Färe, Grosskopf, and Lovell . We posit four types of axioms: indication, monotonicity, independence of units of measurement, and continuity. We analyze six well-known inefficiency indexes from the operations-research and economics literature and discuss several other related indexes. We present two impossibility results demonstrating that no index can satisfy all of the axioms on a general class of (well-behaved) technologies. Specifically, no inefficiency index can satisfy both indication and continuity (in either quantities or technologies), and no inefficiency index can satisfy both monotonicity and unit independence. We present a full evaluation of the trade-offs involved in selecting among the indexes.
|Date of creation:||Apr 2009|
|Contact details of provider:|| Postal: Australian School of Business Building, Sydney 2052|
Fax: +61)-2- 9313- 6337
Web page: http://www.economics.unsw.edu.au/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Salnykov, Mykhaylo & Zelenyuk, Valentin, 2005. "On the Commensurability of Directional Distance Functions," MPRA Paper 7068, University Library of Munich, Germany.
- Robert Russell, R., 1985. "Measures of technical efficiency," Journal of Economic Theory, Elsevier, vol. 35(1), pages 109-126, February.
- Robert Russell, R., 1990. "Continuity of measures of technical efficiency," Journal of Economic Theory, Elsevier, vol. 51(2), pages 255-267, August.
- Steven Levkoff & R. Russell & William Schworm, 2012. "Boundary problems with the “Russell” graph measure of technical efficiency: a refinement," Journal of Productivity Analysis, Springer, vol. 37(3), pages 239-248, June.
- Charnes, A. & Cooper, W. W. & Golany, B. & Seiford, L. & Stutz, J., 1985. "Foundations of data envelopment analysis for Pareto-Koopmans efficient empirical production functions," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 91-107.
- Chambers, Robert G. & Chung, Yangho & Fare, Rolf, 1996. "Benefit and Distance Functions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 407-419, August.