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Value efficiency and its decomposition into direct price and quantity effects

Author

Listed:
  • Jean-Philippe Boussemart

    (Univ. Lille, CNRS, IESEG School of Management, UMR 9221 –LEM, F-59000, France. 3, rue de la Digue, 59000 Lille, France)

  • Hervé Leleu

    (IESEG School of Management, CNRS, Univ. Lille, UMR 9221 –LEM, F-59000, France. 3, rue de la Digue, 59000 Lille, France)

  • Raluca Parvulescu

    (IESEG School of Management, UMR CNRS 9221 –LEM, F-59000, France. 3, rue de la Digue, 59000 Lille, France)

Abstract

Based on the idea that in real markets firms have some freedomto set their output prices and negotiate input unit costs, this paper introduces a new approach for value efficiency decomposition as the product of direct price and quantity effects. Our framework relies on the axiomatization of a value transformation set on which quantity, price and value distance functions can be defined. The methodology developed allows for variousdegrees of dependency between quantity and price as well as for different degrees of freedom in price setting. The value efficiency decomposition can encompass all traditional measures such as cost, revenue, profit and profitability efficiencies. An application on French cattle farms illustrates the appeal of our approach for practitioners.

Suggested Citation

  • Jean-Philippe Boussemart & Hervé Leleu & Raluca Parvulescu, 2021. "Value efficiency and its decomposition into direct price and quantity effects," Working Papers 2021-EQM-02, IESEG School of Management.
    • Handle: RePEc:ies:wpaper:e202102
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    References listed on IDEAS

    as
    1. Ayouba, Kassoum & Boussemart, Jean-Philippe & Lefer, Henri-Bertrand & Leleu, Hervé & Parvulescu, Raluca, 2019. "A measure of price advantage and its decomposition into output- and input-specific effects," European Journal of Operational Research, Elsevier, vol. 276(2), pages 688-698.
    2. Portela, Maria Conceição A. Silva & Thanassoulis, Emmanuel, 2014. "Economic efficiency when prices are not fixed: disentangling quantity and price efficiency," Omega, Elsevier, vol. 47(C), pages 36-44.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Data envelopment analysis; value transformation set; value efficiency; direct price efficiency.;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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