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Value efficiency and its decomposition into direct price and quantity effects

Jean-Philippe Boussemart (), Hervé Leleu and Raluca Parvulescu ()

No 2021-EQM-02, Working Papers from IESEG School of Management

Abstract: Based on the idea that in real markets firms have some freedomto set their output prices and negotiate input unit costs, this paper introduces a new approach for value efficiency decomposition as the product of direct price and quantity effects. Our framework relies on the axiomatization of a value transformation set on which quantity, price and value distance functions can be defined. The methodology developed allows for variousdegrees of dependency between quantity and price as well as for different degrees of freedom in price setting. The value efficiency decomposition can encompass all traditional measures such as cost, revenue, profit and profitability efficiencies. An application on French cattle farms illustrates the appeal of our approach for practitioners.

Keywords: Data envelopment analysis; value transformation set; value efficiency; direct price efficiency. (search for similar items in EconPapers)
JEL-codes: C43 D24 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2021-01
New Economics Papers: this item is included in nep-agr and nep-eff
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