Average-cost efficiency and optimal scale sizes in non-parametric analysis

Giovanni Cesaroni and Daniele Giovannola

European Journal of Operational Research, 2015, vol. 242, issue 1, 121-133

Abstract: Under fairly general assumptions requiring neither a differentiable frontier nor a constant-returns-to-scale technology, this paper introduces a new definition of an optimal scale size based on the minimization of unit costs. The corresponding measure, average-cost efficiency, combines scale and allocative efficiency, and generalizes the measurement of scale economies in efficiency analysis while providing a performance criterion which is stricter than both cost efficiency and scale efficiency measurement. The average-cost efficiency is not reliant upon the uniformity of the firms’ input-price vector, and we supply procedures to compute it in both convex and non-convex production technologies. Empirical illustration of the theoretical results is given with reference to large sets of production units.

Keywords: Scale efficiency; Returns to scale; Scale economies; FDH; DEA (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377221714008017
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:242:y:2015:i:1:p:121-133

DOI: 10.1016/j.ejor.2014.09.062

Access Statistics for this article

European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().