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  3. American Economic Journal: Microeconomics
  4. May 2014
  5. Inefficiency Measurement

American Economic Journal:
Microeconomics

ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)

Inefficiency Measurement

  • Christopher P. Chambers
  • Alan D. Miller
American Economic Journal: Microeconomics
vol. 6, no. 2, May 2014
(pp. 79–92)
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Abstract

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 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, strong monotonicity, and a continuity condition. These axioms characterize a family of path-based measures. By replacing the continuity condition with symmetry, we obtain the coefficient of resource utilization.

Citation

Chambers, Christopher P., and Alan D. Miller. 2014. "Inefficiency Measurement." American Economic Journal: Microeconomics 6 (2): 79–92. DOI: 10.1257/mic.6.2.79

Additional Materials

JEL Classification

  • D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
  • D60 Welfare Economics: General