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Distance Function Efficiency Measures

In: Network Data Envelopment Analysis

Author

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  • Chiang Kao

    (National Cheng Kung University)

Abstract

While management scientists were developing methods to measure efficiency based on the definition of productivity, economists were tackling the same problem using the production function. In the former, efficiency is measured as the ratio of aggregate output to aggregate input, which, from the input point of view, is equal to the smallest amount of input required to produce a given amount of output divided by the actual amount of input consumed. This idea is similar to defining an input distance function to measure the relative distance between the minimum input and the actual input as the input efficiency. From the output point of view, the output-input ratio measure of efficiency is equal to the actual amount of output produced divided by the largest amount of output that can be produced from a given amount of input. An output distance function can thus be defined to measure the relative distance between the actual and maximum outputs as the output efficiency.

Suggested Citation

  • Chiang Kao, 2017. "Distance Function Efficiency Measures," International Series in Operations Research & Management Science, in: Network Data Envelopment Analysis, chapter 0, pages 43-63, Springer.
    • Handle: RePEc:spr:isochp:978-3-319-31718-2_3
    DOI: 10.1007/978-3-319-31718-2_3
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