Resolving a strange case of efficiency

R Färe () and Shawna Grosskopf
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R Färe: Oregon State University

Journal of the Operational Research Society, 2006, vol. 57, issue 11, 1366-1368

Abstract: Abstract In a recent paper in the Journal of the Operational Research Society, Tone proposes an alternative to the Farrell cost efficiency index to avoid the ‘strange case’ problem in which firms with identical inputs and outputs but with input prices differing by some factor (eg, one has input prices twice another) will have the same Farrell cost efficiency. We provide an alternative cost efficiency indicator that avoids this problem, allows for decomposition into technical and allocative efficiency, and is easily estimated using DEA type models.

Keywords: data envelopment analysis; linear programming (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (10)

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DOI: 10.1057/palgrave.jors.2602109

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