Average-profit efficiency and optimal scale sizes with integer data and undesirable outputs

Somayye Karimi Omshi, Sohrab Kordrostami, Alireza Amirteimoori and Armin Ghane Kanafi

Journal of Economic Studies, 2023, vol. 50, issue 7, 1549-1569

Abstract: Purpose - Data envelopment analysis (DEA) is a significant method for measuring the relative efficiency of decision making units (DMUs) that use the least inputs, produce the most desirable outputs and emit the least undesirable outputs in order to maximize their profits. In DEA, detecting an optimal scale size (OSS) is also vital and could be more applicable in economic activities when there are integer and undesirable measures. The purpose of this research is to measure average-profit efficiency (APE) and OSSs with integer data and undesirable outputs. Design/methodology/approach - This study presents an alternative concept of APE using the concepts of most productive scale size (MPSS), profit efficiency and scales, containing desirable and undesirable outputs along with integer and non-integer measures. In fact, the OSS minimizes APE as the optimal scale, which is the ratio of the profit efficiency to the radial average output. Considering the prices of the inputs and desirable outputs, as well as the lack of any specific weight for the undesirable outputs, a two-step model for the numerical calculation of OSS is presented. In addition, the proposed approach is applied to a real data set of Iranian gas companies while there are integer measures and undesirable outputs. Findings - The results show the introduced approach is beneficial to estimate OSSs from the aspect of maximizing profits of firms with undesirable outputs and integer values. Originality/value - Estimating OSSs is the significant issue for managers, but its investigation in the presence of integer measures and undesirable outputs is presently under-considered.

Keywords: Optimal scale sizes; Integer data; Undesirable outputs; Profit; Data envelopment analysis (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

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:eme:jespps:jes-05-2022-0293

DOI: 10.1108/JES-05-2022-0293

Access Statistics for this article

Journal of Economic Studies is currently edited by Prof Mohsen Bahmani-Oskooee

More articles in Journal of Economic Studies from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().