Decomposing profit efficiency using a slack-based directional distance function

This paper develops a slack-based decomposition of profit efficiency based on a directional distance function. It is an alternative to Cooper, Pastor, Aparicio, and Borras (2011)

Eco-efficiency considering the issue of heterogeneity among power plants

One of the main objectives in restructuring power industry is enhancing the efficiency of power facilities. However, power generation industry, which plays a key role in the power industry, has a noticeable share in emission amongst all other emission-generating sectors. In this study, we have developed some new Data Envelopment Analysis models to find efficient power plants based on less fuel consumption, combusting less polluting fuel types, and incorporating emission factors in order to measure the ecological efficiency trend. We then applied these models to measuring eco-efficiency during an eight-year period of power industry restructuring in Iran. Results reveal that there has been a significant improvement in eco-efficiency, cost efficiency and allocative efficiency of the power plants during the restructuring period. It is also shown that despite the hydro power plants look eco-efficient; the combined cycle ones have been more allocative efficient than the other power generation technologies used in Iran

The flexible reverse approach for decomposing economic inefficiency:With an application to Taiwanese banks

Profit inefficiency is conventionally decomposed into two mutually exclusive components representing profit loss due to technical inefficiency, and, through duality theory, a residual interpreted as allocative inefficiency. Although conventional models solve technical inefficiencies by reducing inputs and increasing outputs, achieving profit efficiency may require larger than observed input quantities and/or smaller than observed output quantities. However, overcoming the restrictions in the direction of the technical adjustments in input and output quantities demands flexibility that existing models do not offer. Thus, to achieve this flexibility, we introduce an endogenous profit inefficiency measure that reverses the subordinate role played by allocative inefficiency. The new measure is based on a monetized version of the weighted additive model seeking maximum feasible profit gains without restricting inputs and output adjustments. This prevents the conflicting prescriptions that the conventional model may offer in the form of non-monotonic input and output changes, thereby reducing adjustment costs. We apply the proposed model to real data from financial institutions. The differences in the managerial and policy recommendations for optimal resource allocation are relevant, with the conventional model wrongly recommending reductions in inputs in terms of the amounts and scale required to maximize profit.</p