Inefficiency Measurement

Economics

Speaker:Alan Miller, University of Haifa, Israel
Date: Friday 8 February 2013
Time: 16.15
Location: Matrix Lecture Theatre, Building One

Further details

We introduce an ordinal model of efficiency measurement. Our primitive is a notion of efficiency that is comparative, but not cardinal or absolute. In this framework, we postulate axioms that we believe an ordinal efficiency measure should satisfy. Primary among these are choice consistency and planning consistency, which guide the measurement of efficiency in a firm with access to multiple technologies. Other axioms include scale-invariance, which states that pounds and kilograms are treated the same, strong monotonicity, which states that efficiency should decrease if the inputs and outputs remain static when the technology becomes unambiguously more efficient, and a very mild continuity condition. These axioms characterize a family of path-based measures. By replacing the continuity condition with symmetry, which states that the names of commodities do not matter, we obtain the coefficient of resource utilization.