Addition and aggregative efficiency

Rolf Färe and Giannis Karagiannis
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Rolf Färe: Oregon State University

Journal of Productivity Analysis, 2023, vol. 59, issue 3, No 5, 285 pages

Abstract: Abstract The aim of this paper is to relate the condition for cost subadditivity to aggregative efficiency. In particular, we verify that subadditivity of the cost function occurs when aggregate cost efficiency is not less than the cost efficiency of the average production unit. This provides a simple way of examining the potential of merging two or more firms and of making inference about the extent of industry concentration. It also provides a simple nonparametric test for subadditivity of the cost function.

Keywords: Cost subadditivity; Aggregate efficiency; Industry concentration (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11123-023-00666-3

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