Multi-output profit efficiency and directional distance functions

Laurens Cherchye, Bram De Rock and Barnabé Walheer

Omega, 2016, vol. 61, issue C, 100-109

Abstract: We extend a recently developed DEA methodology for cost efficiency analysis towards profit efficiency settings. This establishes a novel DEA toolkit for profit efficiency assessments in situations with multiple inputs and multiple outputs. A distinguishing feature of our methodology is that it assumes output-specific production technologies. In addition, the methodology accounts for the use of joint inputs, and explicitly includes information on the allocation of inputs to individual outputs. We also establish a dual relationship between our multi-output profit inefficiency measure and a technical inefficiency measure that takes the form of a multi-output directional distance function. Finally, we demonstrate the empirical usefulness of our methodology by an empirical application to a large service company.

Keywords: DEA; Multiple outputs; Nonparametric efficiency analysis; Profit efficiency; Joint inputs; Output-specific inputs; Directional distance function (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (37)

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Working Paper: Multi-output Profit Efficiency and Directional Distance Functions (2014)
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DOI: 10.1016/j.omega.2015.07.010

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