Nonparametric Methods for Evaluating Economic Efficiency and Imperfect Competition

Authors: Kallio M.¹; Kallio M.²

Source: Journal of Productivity Analysis, Volume 18, Number 2, September 2002 , pp. 171-189(19)

Publisher: Springer

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Abstract:

This article unifies and extends ideas from nonparametric production analysis and DEA for testing organizational efficiency. We show how the admissible price set can be restricted to account for prior information on prices. These restrictions may relate prices to input and output quantities in order to test noncompetitive behavior of the evaluated decision making unit. While the resulting efficiency tests cannot always be cast into linear programming problems, we discuss various solution strategies for the tests. Thereby we consider the question when does local optimality of the result guarantee global optimality. We also show how the decision maker's preferences, for example ranking information, can be adopted into DEA models in a simple manner. Finally, the approach with price restrictions is illustrated with an application to test noncompetitive behavior of the pulp and paper industries in Finland.

Keywords: efficiency; production analysis; data envelopment analysis; noncompetitive behavior; pulp and paper industry

Language: English

Document Type: Research article

Affiliations: 1: Finnish Forest Research Institute, Unioninkatu 40 A, 00170 Helsinki, Finland maarit.kallio@metla.fi 2: Helsinki School of Economics, POB 1210, 00101 Helsinki, Finland kallio@hkkk.fi

Publication date: 2002-09-01