A New Decomposition of Cost Efficiency based on the Price and Cost based Production Possibility Sets in non-competitive space in DEA

Document Type : Research Paper


Department of Mathematics, Khorramabad Branch, Islamic Azad University, Khorramabad, Iran.


Identification of various sources of inefficiency plays an important role in the performance analysis aimed at developing plans for the improvement of decision making. In this regard, not only technical, cost, and allocative efficiency can be estimated by information on inputs and outputs and their prices, but losses due to the lack of profit and revenue and optimal cost can also be calculated based on the relevant inefficiency. The present paper aimed at providing new estimation of cost efficiency and sources of losses in the total efficiency in a non-competitive environment where there is the possibility of change in prices of inputs and outputs from one DMU to another. In line with studies (Tone .K, "A Strange Case of the Cost and Allocative Efficiencies in DEA". Journal of the Operational Research Society 53, (2002), pp.1225-1231) and (Tone. K., Tsutsui, M. "Decomposition of Cost Efficiency and its Application to Japanese-Us Electric Utility Comparisons". Socio-Economic Planning Sciences 47 (2007), pp.91-106), the present study sought to introduce new sources of inefficiency and related losses by presenting new price-based and cost-based production possibility sets.


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