Firm and industry level profit efficiency analysis under incomplete price data

A nonparametric approach based on absolute and uniform shadow prices

T. Kuosmanen, M. Kortelainen, T. Sipilainen, L.J.H. Cherchye

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We discuss the nonparametric approach to profit efficiency analysis at the firm and industry levels in the absence of complete price information. Two new insights are developed. First, we measure profit inefficiency in monetary terms using absolute shadow prices. Second, we evaluate all firms using the same input-output prices. This allows us to aggregate firm-level profit inefficiencies to the overall industry inefficiency. Besides the measurement of profit losses, the presented approach enables one to recover absolute price information from quantity data. We conduct a series of Monte Carlo simulations to study the performance of the proposed approach in controlled production environments.
Original languageEnglish
Pages (from-to)584-594
JournalEuropean Journal of Operational Research
Volume202
Issue number2
Publication statusPublished - 2010

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Shadow Price
Profit
Profitability
Industry
Monte Carlo Simulation
Series
Shadow price
Inefficiency
Efficiency analysis
Profit efficiency
Evaluate
Output
Term
Business

Cite this

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title = "Firm and industry level profit efficiency analysis under incomplete price data: A nonparametric approach based on absolute and uniform shadow prices",
abstract = "We discuss the nonparametric approach to profit efficiency analysis at the firm and industry levels in the absence of complete price information. Two new insights are developed. First, we measure profit inefficiency in monetary terms using absolute shadow prices. Second, we evaluate all firms using the same input-output prices. This allows us to aggregate firm-level profit inefficiencies to the overall industry inefficiency. Besides the measurement of profit losses, the presented approach enables one to recover absolute price information from quantity data. We conduct a series of Monte Carlo simulations to study the performance of the proposed approach in controlled production environments.",
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Firm and industry level profit efficiency analysis under incomplete price data : A nonparametric approach based on absolute and uniform shadow prices. / Kuosmanen, T.; Kortelainen, M.; Sipilainen, T.; Cherchye, L.J.H.

In: European Journal of Operational Research, Vol. 202, No. 2, 2010, p. 584-594.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

T1 - Firm and industry level profit efficiency analysis under incomplete price data

T2 - A nonparametric approach based on absolute and uniform shadow prices

AU - Kuosmanen, T.

AU - Kortelainen, M.

AU - Sipilainen, T.

AU - Cherchye, L.J.H.

PY - 2010

Y1 - 2010

N2 - We discuss the nonparametric approach to profit efficiency analysis at the firm and industry levels in the absence of complete price information. Two new insights are developed. First, we measure profit inefficiency in monetary terms using absolute shadow prices. Second, we evaluate all firms using the same input-output prices. This allows us to aggregate firm-level profit inefficiencies to the overall industry inefficiency. Besides the measurement of profit losses, the presented approach enables one to recover absolute price information from quantity data. We conduct a series of Monte Carlo simulations to study the performance of the proposed approach in controlled production environments.

AB - We discuss the nonparametric approach to profit efficiency analysis at the firm and industry levels in the absence of complete price information. Two new insights are developed. First, we measure profit inefficiency in monetary terms using absolute shadow prices. Second, we evaluate all firms using the same input-output prices. This allows us to aggregate firm-level profit inefficiencies to the overall industry inefficiency. Besides the measurement of profit losses, the presented approach enables one to recover absolute price information from quantity data. We conduct a series of Monte Carlo simulations to study the performance of the proposed approach in controlled production environments.

M3 - Article

VL - 202

SP - 584

EP - 594

JO - European Journal of Operational Research

JF - European Journal of Operational Research

SN - 0377-2217

IS - 2

ER -