Abstract
Färe and Lovell ( J. Econom. Theory 19 (1978), 150–162) suggest four properties that a measure of technical efficiency should satisfy; the commonly employed Debreu-Farrell measure fails three of them. Necessary and sufficient conditions for a measure to satisfy the four conditions are provided and recently proposed measures are analyzed in the light of this result. Also, it is argued that the Debreu-Farrell measure has several desirable properties when one takes account of (1) (perhaps unknown) market prices and the relationship between technical and economic efficiency and (2) its characterization as a measure of economic efficiency using the shadow prices implicit in the production technology.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
