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Efficiency Measures for Industrial Organization

Author

Listed:
  • TEN RAA, THIJS

    (Tilburg University)

Abstract

The aim of the paper is to measure the efficiency of an industry, and to decompose it into firm efficiencies—which indicate how close firms approximate best practices—and an organization efficiency—which indicates the degree of optimality of the number of firms and their distribution. The latter component provides an efficiency measure for the industrial organization. Economies or diseconomies of scale and of scope play a big role in the determination of the optimal industrial organization and the consequent measurement of the efficiency of an observed industry. Different approaches to the modeling of scale economies will be reviewed. The paper shows in detail how the efficiency of an industrial organization can be measured as a gap between mean firm efficiency and overall industry efficiency. The analysis is extended to dynamic models, to measure the role of entry and exit in the efficiency of industrial organization.

Suggested Citation

  • Ten Raa, Thijs, 2010. "Efficiency Measures for Industrial Organization," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 45(2), pages 161-192.
    • Handle: RePEc:dse:indecr:0026
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    Cited by:

    1. Subhash C. Ray, 2014. "Branching Efficiency in Indian Banking: An Analysis of a Demand-Constrained Network," Working papers 2014-34, University of Connecticut, Department of Economics.
    2. Subhash C. Ray, 2011. "Nonparametric Measurement of Cost Efficiency of a Demand Constrained Branch Network: An Application to Indian Banking," Working papers 2011-03, University of Connecticut, Department of Economics.
    3. Ray, Subhash, 2016. "Cost efficiency in an Indian bank branch network: A centralized resource allocation model," Omega, Elsevier, vol. 65(C), pages 69-81.
    4. Subhash C. Ray & Shilpa Sethia, 2023. "A State-Level Resource Allocation Model for Emission Reduction and Efficiency Improvement in Thermal Power Plants," Working papers 2023-08, University of Connecticut, Department of Economics.

    More about this item

    Keywords

    Scope (dis)economies; Industrial Organization; Efficiency; Aggregation; Productivity;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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