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Nerlovian profit inefficiency in non-fully-competitive settings: Definition and decomposition

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  • Yu, Ming-Miin

Abstract

Nerlovian profit inefficiency applies directional distance functions, which allow specification of the direction in which the decision-making units will be evaluated. Through some degree of adjustable prices, the source of Nerlovian profit inefficiency can further be decomposed into technical inefficiency, price inefficiency and allocative inefficiency. The proposed indicator is demonstrated by an empirical application to a sample of Taiwanese banks in 2011. The example explains how the empirical usefulness of the proposed approach is able to properly measure Nerlovian profit inefficiency and its components, and shows how the price adjustment affects the banks' performance in Taiwan.

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  • Yu, Ming-Miin, 2020. "Nerlovian profit inefficiency in non-fully-competitive settings: Definition and decomposition," Omega, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:jomega:v:90:y:2020:i:c:s0305048318301014
    DOI: 10.1016/j.omega.2018.11.002
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    6. Chen, Xiang & Grifell-Tatjé, Emili & Fu, Tsu-Tan, 2023. "A profit difference decomposition model for measuring group performance: an application to Chinese and Taiwanese commercial banks," Omega, Elsevier, vol. 120(C).

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