Efficiency Measurement in Special Production Stages

Chiang Kao
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Chiang Kao: National Cheng Kung University

Chapter Chapter 5 in Network Data Envelopment Analysis, 2023, pp 89-114 from Springer

Abstract: Abstract The preceding three chapters discuss how to measure the efficiency of a DMU based on the production frontier constructed from the peer DMUs. The production possibility set is assumed to be convex. In the classical production theory, production is separated into three stages, as depicted in Fig. 5.1 (Ferguson & Gould, 1986). At the beginning, the output rises at an increasing rate as the input increases, then at a decreasing rate, and finally at a negative rate. The first stage corresponds to use of the variable input X to point b, where the average product (AP) achieves its maximum. At this point the marginal product (MP) equals the average product. Stage II starts from this point to point c, where the marginal product of X drops to zero and the total product (TP) of X culminates. Stage III corresponds to use of the variable input X to the right of this point, where the marginal product is negative.

Date: 2023
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DOI: 10.1007/978-3-031-27593-7_5

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