Economic efficiency when prices are not fixed: disentangling quantity and price efficiency

Maria Conceição A. Silva Portela*, Emmanuel Thanassoulis

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

20 Citations (Scopus)

Abstract

This paper proposes an approach to compute cost efficiency in contexts where units can adjust input quantities and to some degree prices so that through their joint determination they can minimise the aggregate cost of the outputs they secure. The model developed is based on the data envelopment analysis (DEA) framework and can accommodate situations where the degree of influence over prices ranges from minimal to considerable. When units cannot influence prices at all the model proposed reduces to the standard cost efficiency DEA model for the case where prices are taken as exogenous. In addition to the cost efficiency model, we introduce an additive decomposition of potential cost savings into a quantity and a price component, based on Bennet indicators.
Original languageEnglish
Pages (from-to)36-44
Number of pages9
JournalOmega (United Kingdom)
Volume47
DOIs
Publication statusPublished - Sep 2014

Keywords

  • Bennet indicators
  • Cost efficiency
  • Data envelopment analysis
  • Price efficiency

Fingerprint

Dive into the research topics of 'Economic efficiency when prices are not fixed: disentangling quantity and price efficiency'. Together they form a unique fingerprint.

Cite this