MODELING OUTPUT GAINS AND EARNINGS' GAINS

Hirofumi Fukuyama () and William L. Weber ()
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William L. Weber: Department of Economics, Southeast Missouri State University, Cape Girardeau, MO 63701, USA

International Journal of Information Technology & Decision Making (IJITDM), 2005, vol. 04, issue 03, 433-454

Abstract: In this paper, we examine the potential gains in physical outputs or earnings on outputs from an optimal reallocation of inputs. When some decision-making units (DMUs) face higher input prices than other DMUs, the Farrell decomposition of cost efficiency can potentially indicate that a firm with lower overall costs of production is less efficient than a firm that uses fewer physical inputs, but has higher costs. We extend our gain functions accounting for cases where DMUs face different input prices. An empirical illustration of our method is provided using data on Japanese banks operating during 2000–2003.

Keywords: Data Envelopment Analysis (DEA); Output gain functions; Earnings' gain functions; banks (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1142/S0219622005001659

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