Efficiency measurement with a non-convex free disposal hull technology

Hirofumi Fukuyama (), Jens Hougaard (), Kazuyuki Sekitani and Jianming Shi
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Kazuyuki Sekitani: Shizuoka University, Shizuoka, Japan
Jianming Shi: Tokyo University of Science, Saitama, Japan

Journal of the Operational Research Society, 2016, vol. 67, issue 1, 9-19

Abstract: We investigate the basic monotonicity properties of least-distance (in)efficiency measures on the class of non-convex FDH (free disposable hull) technologies. We show that any known FDH least-distance measure violates strong monotonicity over the strongly (Pareto-Koopmans) efficient frontier. Taking this result into account, we develop a new class of FDH least-distance measures that satisfy strong monotonicity and show that the developed (in)efficiency measurement framework has a natural profit interpretation.

Date: 2016
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