Inefficiency

Christopher Chambers and Alan Miller

No WP2011/14, Working Papers from University of Haifa, Department of Economics

Abstract: We introduce an ordinal model of efficiency measurement. Our primitive is a notion of efficiency that is comparative, but not cardinal or absolute. In this framework, we postulate axioms that we believe an ordinal efficiency measure should satisfy. Primary among these are choice consistency and planning consistency, which guide the measurement of efficiency in a firm with access to multiple technologies. Other axioms include symmetry, which states that the names of commodities do not matter, scale-invariance, which says that units of measurement of commodities does not matter, and strong monotonicity, which states that efficiency should decrease if the inputs and outputs remain static when the technology becomes unambiguously more efficient. These axioms characterize a unique ordinal efficiency measure which is represented by the coefficient of resource utilization. By replacing symmetry (the weakest of our axioms) with a very mild continuity condition, we obtain a family of path-based measures.

Keywords: Efficiency Measurement; Coefficient of Resource Utilization; Ordinal; Choice Consistency; Planning Consistency; Path-based (search for similar items in EconPapers)
JEL-codes: C43 D24 (search for similar items in EconPapers)
Pages: 27
Date: 2011-11-30
New Economics Papers: this item is included in nep-eff and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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