Inner and outer approximations of technology: A shadow profit approach

Hervé Leleu

Omega, 2013, vol. 41, issue 5, 868-871

Abstract: In this paper we extend the taxonomy on inner and outer approximations to a technology by assuming that price data are not available. Mimicking Varian [Varian H., Econometrica 1984;52(3):579], we introduce a Weak Axiom of Shadow Profit Maximization (WASPM) to test if observed production plans are compatible with technically efficient behavior. If the test fails for an observed sample, we then characterize the maximal subset of observed production plans that meets WASPM and we derive lower and upper bounds on technical efficiency for production plans that are observed but not in this subset. We also derive linear programs to implement these bounds.

Keywords: Technical efficiency; Shadow prices; Inefficiency bounds (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (7)

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Working Paper: Inner and outer approximations of technology: a shadow profit approach (2013)
Working Paper: Inner and Outer Approximations of Technology: A Shadow Profit Approach (2012)
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DOI: 10.1016/j.omega.2012.11.001

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