Abstract
Measures of efficiency can be viewed as ex post measures of how well firm managers have solved different optimisation problems. For example, measures of output-oriented technical efficiency can be viewed as measures of how well managers have maximised outputs when inputs and output mixes have been predetermined. Similarly, measures of profit efficiency can be viewed as measures of how well managers have maximised profits when inputs and outputs have been chosen freely. This chapter discusses various output-, input-, revenue-, cost-, profit- and productivity-oriented measures of efficiency. Except where explicitly stated otherwise, all measures of efficiency defined in this chapter take values in the closed unit interval. A firm manager is said to have been fully efficient by some measure if and only if that measure takes the value one.
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