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Note: A Problem with the Decomposition of Technical Inefficiency into Scale and Congestion Components

Author

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  • John McDonald

    (Flinders University of South Australia, GPO Box 2100, Adelaide SA 5001, Australia)

Abstract

In 1988, Byrnes, Färe, Grosskopf and Lovell define a decomposition of inefficiency differentials into scale and congestion components. This note shows that the decomposition may be sensitive to the order in which the two components are calculated, and, consequently, use of the decomposition may result in misleading signals being given to management.

Suggested Citation

  • John McDonald, 1996. "Note: A Problem with the Decomposition of Technical Inefficiency into Scale and Congestion Components," Management Science, INFORMS, vol. 42(3), pages 473-474, March.
    • Handle: RePEc:inm:ormnsc:v:42:y:1996:i:3:p:473-474
    DOI: 10.1287/mnsc.42.3.473
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    Citations

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    Cited by:

    1. Bogetoft, Peter & Fare, Rolf & Obel, Borge, 2006. "Allocative efficiency of technically inefficient production units," European Journal of Operational Research, Elsevier, vol. 168(2), pages 450-462, January.
    2. John McDonald, 2012. "The relative efficiency of king's, ecclesiastical, and lay estates in Domesday Essex, 1086," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 52(3), pages 250-269, November.
    3. Bruno De Borger & Kristiaan Kerstens & Diego Prior & Ignace Van de Woestyne, 2013. "Static efficiency decompositions and capacity utilization: integrating economic and technical capacity notions," Applied Economics, Taylor & Francis Journals, vol. 45(24), pages 3529-3529, August.
    4. Walter Briec & Kristiaan Kerstens & Ignace Van de Woestyne, 2016. "Congestion in production correspondences," Journal of Economics, Springer, vol. 119(1), pages 65-90, September.
    5. Färe, Rolf & Karagiannis, Giannis, 2017. "The denominator rule for share-weighting aggregation," European Journal of Operational Research, Elsevier, vol. 260(3), pages 1175-1180.
    6. Dervaux, Benoît & Kerstens, Kristiaan & Vanden Eeckaut, Philippe, 1998. "Radial and nonradial static efficiency decompositions: a focus on congestion measurement," Transportation Research Part B: Methodological, Elsevier, vol. 32(5), pages 299-312, June.
    7. Rolf Färe & Shawna Grosskopf, 2000. "Research Note. Decomposing Technical Efficiency with Care," Management Science, INFORMS, vol. 46(1), pages 167-168, January.
    8. Cooper, W. W. & Gu, Bisheng & Li, Shanling, 2001. "Note: Alternative treatments of congestion in DEA - a response to the Cherchye, Kuosmanen and Post critique," European Journal of Operational Research, Elsevier, vol. 132(1), pages 81-87, July.
    9. Kao, Chiang, 2010. "Congestion measurement and elimination under the framework of data envelopment analysis," International Journal of Production Economics, Elsevier, vol. 123(2), pages 257-265, February.
    10. Timo Kuosmanen & Timo Sipiläinen, 2009. "Exact decomposition of the Fisher ideal total factor productivity index," Journal of Productivity Analysis, Springer, vol. 31(3), pages 137-150, June.

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