In search for the Most Preferred Solution in Value Efficiency Analysis

Panagiotis Ravanos (panagiotis.ravanos@ec.europa.eu) and Giannis Karagiannis

Discussion Paper Series from Department of Economics, University of Macedonia

Abstract: : Choosing the Most Preferred Solution (MPS), namely a real or artificial Decision Making Unit (DMU) reflecting the decision maker’s preferences over the desirable structure of inputs and outputs, is of particular importance in Value Efficiency Analysis (VEA). In this paper, we review various MPS choices used in the VEA literature and propose some new, which rely respectively on the relative location of frontier DMUs, the most productive scale size (MPSS), the Average Production Unit (APU), and common vectors of weights. The suggested MPS choices reflect overall organizational goals such as the pursuit of scale economies and the maximization of structural efficiency, or the need to assess DMUs against common standards because of limited control over the resources allocated to them or autonomy in setting their own priorities. The potential implications of using different MPSs in VEA are illustrated by providing comparative empirical results using a dataset of 526 Greek cotton farms.

Keywords: Value Efficiency Analysis; Most Preferred Solution; Interior-Exterior DMUs; Terminal DMUs; Most Productive Scale Size; Average Production Unit; Common Weights; Fully Dimensional Efficient Facet. (search for similar items in EconPapers)
Date: 2022-07, Revised 2022-07
New Economics Papers: this item is included in nep-eff
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Citations: View citations in EconPapers (1)

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Journal Article: In search for the most preferred solution in value efficiency analysis (2022)
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