Allocative Efficiency of Technically Inefficient Production Units

We discuss how to measure allocative efficiency without presuming technical efficiency. This is relevant when it is easier to introduce reallocations than improvements of technical efficiency. We compare the approach to the traditional one of assuming technical efficiency before measuring allocative efficiency. In particular, we develop necessary and sufficient conditions on the technology to ensure consistent measures and we give dual organizational interpretations of the approaches.technical efficiency, allocative efficiency, homethetic technologies, slack consumption, Research and Development/Tech Change/Emerging Technologies,

Estimating the Potential Gains from Mergers: The Danish Agricultural Extension Services

We introduce simple non-parametric models to estimate the potential gains from merging production units. Three effects are distinguished. A merger may affect technical efficiency. It also affects the size of the operation which may or may not be advantageous depending on the return to scale properties of the underlying technologies. Lastly, it affects the mix of inputs available and the mix of outputs demanded. A merged unit face more "balanced" or "harmonic" input and output profiles which is typically advantageous. We use the model to estimate the potential gains from merging agricultural extension offices in Denmark.Teaching/Communication/Extension/Profession,

Internet Based Benchmarking

We discuss the design of interactive, internet based benchmarking using parametric (statistical) as well as non-parametric (DEA) models. The user receives benchmarks and improvement potentials. The user is also given the possibility to search different efficiency frontiers and hereby to explore alternative improvement strategies. An implementation of both a parametric and a non parametric model are presented.Research and Development/Tech Change/Emerging Technologies,

Estimating the Potential Gains from Mergers

We introduce simple production economic models to estimate the potential gains from mergers. We decompose the gains into technical efficiency, size (scale) and harmony (mix) gains, and we discuss alternative ways to capture these gains. We propose to approximate the production processes using the non-parametric Data Envelopment Analysis (DEA) approach, and we use the resulting operational approach to estimate the potential gains from merging agricultural extension offices in Denmark. Contents: 1. Introduction, 2. Literature, 3. Production Models, 4. Measures of Merger Gains, 5. Decomposing Merger Gains, 6. Alternative Decompositions, 7. The Danish Agricultural Extension Services, 8. Final Remarks, References. Key Words: Data Envelopment Analysis, management, organization, mergersData Envelopment Analysis, management, organization, mergers, Teaching/Communication/Extension/Profession,

Yardstick Based Procurement Design In Natural Resource Management

This paper discuss the design of multidimensional yardstick based procurement auction. The suggested design combines Data Envelopment Analysis (DEA) based yardstick schemes with the multidimensional score auction. The principal select a single winner to perform a project, characterized by a multidimensional vector. The design is especially useful when there are uncertainty about the underlying common cost structure as well as the principal's valuation function. Potential applications in natural resource management is provided.Resource /Energy Economics and Policy,

Super Efficiency Evaluations Based on Potential Slack

Super efficiency evaluations are introduced along the lines of the potential improvements approach in Bogetoft and Hougaard (1999). Both a reference selection and a related super efficiency index is defined. The new (potential slack) super efficiency index is compared to a Farrell-based super efficiency index (as in Andersen and Petersen 1993) with respect to convex envelopment technologies.super efficiency, potential slack, reference selection, efficiency index, DEA, Research Methods/ Statistical Methods,

Issues and Challenges in Regulation Economics

Effective economic regulation demands clear objectives, sound economic reasoning and a careful analysis of the inevitable trade-offs between conflicting societal interests. The key problems are linked to the information asymmetry between the regulator and the regulated firms. Although the market principle may provide some useful guidelines, the problems of bankruptcy and windfall profits remain to be addressed. In this overview, we discuss how modern yardstick regimes in combination with franchise auctions provide powerful solutions that may contribute to both societal and industry demands.Agricultural and Food Policy,

Quota Trading and Profitability: Theoretical Models and Applications to Danish Fisheries

Using Data Envelopment Analysis (DEA), we provide a framework to analyze the potential gains from quota trading. We compare the industry profit and structure before and after a free trade reallocation of production quotas. The effects of tradable production quotas depend on several technological and behavioral characteristics, including the ability to learn best practice (catch-up) and the ability to change the input and output composition (mix). To illustrate the usefulness of our approach, we analyze a dataset from the Danish fishery. We study the industry profit and structure under each of four sets of technological and behavioral characteristics.Data Envelopment Analysis (DEA), Individual Transferable Quotas (ITQ), reallocation, technical efficiency, allocative efficiency, fishery, Agribusiness, C61, L51, Q22, Q28,

DEA-Based Incentive Regimes in Health-Care Provision

A major challenge to legislators, insurance providers and municipalities will be how to manage the reimbursement of health-care on partially open markets under increasing fiscal pressure and an aging population. Although efficiency theoretically can be obtained by private solutions using fixed-payment schemes, the informational rents and production distortions may limit their implementation. The healthcare agency problem is characterized by (i) a complex multi-input multi-output technology, (ii) information uncertainty and asymmetry, and (iii) fuzzy social preferences. First, the technology, inherently nonlinear and with externalities between factors, yield parametric estimation difficult. However, the flexible production structure in Data Envelopment Analysis (DEA) offers a solution that allows for the gradual and successive refinement of potentially nonconvex technologies. Second, the information structure of healthcare suggests a context of considerable asymmetric information and considerable uncertainty about the underlying technology, but limited uncertainty or noise in the registration of the outcome. Again, we shall argue that the DEA dynamic yardsticks (Bogetoft, 1994, 1997, Agrell and Bogetoft, 2001) are suitable for such contexts. A third important characteristic of the health sector is the somewhat fuzzy social priorities and the numerous potential conflicts between the stakeholders in the health system. Social preferences are likely dynamic and contingent on the disclosed information. Similarly, there are several potential hidden action (moral hazard) and hidden information (adverse selection) conflicts between the different agents in the health system. The flexible and transparent response to preferential ambiguity is one of the strongest justifications for a DEA-approach. DEA yardstick regimes have been successfully implemented in other sectors (electricity distribution) and we present an operalization of the power-parameter p in an pseudo-competitive setting that both limits the informational rents and incites the truthful revelation of information. Recent work (Agrell and Bogetoft, 2002) on strategic implementation of DEA yardsticks is commented in the healthcare context, where social priorities change the tradeoff between the motivation and coordination functions of the yardstick. The paper is closed with policy recommendations and some areas of further work.Data Envelopment Analysis, regulation, health care systems, efficiency, Health Economics and Policy,

Network Regulation under Climate Policy Review

Climate change policy, in particular in Europe, will a¤ect the energy sector through the exposure to massive penetration of distributed energy resources or decentralized generation into electricity distribution and transmission grids. As the prerequisites for infrastructure regulation still prevail in the future, the question arises whether the current regulatory model is still valid. In this paper, we chararcterize some of the e¤ects of climate change policy on the network tasks, assets and costs and contrast this with the assumptions implicit or explicit in current economic network regulation. The resulting challenge is identi ed as the change in the direction of higher asymmetry of information and higher capital intensity, combined with ambiguities in terms of task separation. Methodolog- ically, we argue that this may require a mobilization of the litterature related to delegated and hierarchical systems, e.g. team performance, as the externalities are joint products from multiple independent stages where individual regulation may introduce distortions. To provide guidance, we present a model of investment provision under regulation between a distribution system operator (DSO) and a potential investor-generation. The results from the model con rm the hypothesis that network regulation should nd a focal point, should integrate externalities in the performance assessment and should avoid wide delegation of contracting-billing for climate change technologies.network regulation; climate change; investments; distributed generation