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Resolving a strange case of efficiency

  • Technical Note
  • Published:
Journal of the Operational Research Society

Abstract

In a recent paper in the Journal of the Operational Research Society, Tone proposes an alternative to the Farrell cost efficiency index to avoid the ‘strange case’ problem in which firms with identical inputs and outputs but with input prices differing by some factor (eg, one has input prices twice another) will have the same Farrell cost efficiency. We provide an alternative cost efficiency indicator that avoids this problem, allows for decomposition into technical and allocative efficiency, and is easily estimated using DEA type models.

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Acknowledgements

We thank our referees for their constructive comments.

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Authors and Affiliations

  1. Oregon State University, Corvallis, OR, USA

    R Färe & S Grosskopf

  2. R.R. Institute of Applied Economics, Malmö, Sweden

    R Färe & S Grosskopf

Authors
  1. R Färe
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  2. S Grosskopf
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Corresponding author

Correspondence to R Färe.

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Färe, R., Grosskopf, S. Resolving a strange case of efficiency. J Oper Res Soc 57, 1366–1368 (2006). https://doi.org/10.1057/palgrave.jors.2602109

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  • DOI: https://doi.org/10.1057/palgrave.jors.2602109

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