a nonparametric cost approach to scale efficiency starting with farrell fieldhouse 1962 a host of notiparametric models have been developed for calculation of scale efficiency a common property of these models is that they are specified in terms of input output data duality theory has taught us that technological characteristics may be analyzed from either the primal or the dual cost side the purpose of this paper is to introduce a nonparametric dual method of calculating scale efficiency

unanticipated inflation and economic activity abstract this paper presents a new empirical test of the expectations adjusted supply fucntion obtaining the market s inflationary expectations from the market interest rate the results support the existence of a positive relationship between unanticipated inflation and the level of economic activity while anticipated inflation seems to have no effect

a test for subadditivity of the cost function with an application to the bell system stable url http links jstor org sici sici 0002 8282 28198409 2974 3a4 3c615 3aatfsot 3e2 0 co 3b2 rthe american economic review is currently published by american economic association your use of the jstor archive indicates your acceptance of jstor s terms and conditions of use available athttp www jstor org about terms html jstor s terms and conditions of use provides in part that unless you have obtainedprior permission you may not download an entire issue of a journal or multiple copies of articles and you may use content inthe jstor archive only for your personal non commercial use please contact the publisher regarding any further use of this work publisher contact information may be obtained athttp www jstor org journals aea html each copy of any part of a jstor transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission the jstor archive is a trusted digital repository providing for long term preservation and access to leading academicjournals and scholarly literature from around the world the archive is supported by libraries scholarly societies publishers and foundations it is an initiative of jstor a not for profit organization with a mission to help the scholarly community takeadvantage of advances in technology for more information regarding jstor please contact support jstor org http www jstor orgmon jul 2 16 52 19 2007

estimation of returns to scale using data envelopment analysis a comment banker 1984 introduced the idea that the sum of the intensity variables in the dea activity analysis model can be used to identify returns to scale a counterexample in chang and guh 1991 shows that banker s method may fail this prompted banker and thrall 1992 to develop an alternative approach to estimate scale efficiency using dea seemingly unaware of the work by byrnes fare and grosskopf 1984 fare grosskopf and lovell 1985 1994 and fare and grosskopf 1985 etc on the same topic their new approach is very similar to the methodology originated in these references the purpose of this comment is to make our method known and to contrast it to the banker and thrall 1992 approach

the determinants of occupational success in britain this paper is concerned with measuring the true impact of certain human capital variables on an individual s occupational position the particular variables which are analysed are training qualifications and spells of sickness and unemployment the longitudinal nature of the data enables us to control for all relevant individual attributes which remain fixed over the period of the sample this is vitally important because these attributes are strongly correlated with the variables of interest and would seriously corrupt estimates derived from a single cross section a method of generating consistent estimates as n oo t fixed for a dynamic model with fixed effects is also illustrated

efficient market testing of the expectations adjusted supply function hypothesis for italy 1985 efficient market testing of the expectations adjusted supply function hypothesis for italy applied economics vol 17 no 6 pp 1065 1070

the time varying parameter model for modeling changing conditional variance the case of the lucas hypothesis the main econometric issue in testing the lucas 1973 hypothesis in a time series context is estimation of the forecast error variance conditional on past information the conditional variance may vary through time as monetary policy evolves and agents are obliged to infer its present state under the assumption that a monetary policy regime is continuously changing a time varying parameter model is proposed for the monetary growth function based on kalman filtering estimation of recursive forecast errors and their conditional variances the lucas hypothesis is tested for the u s economy 1964 1 1985 4 using monetary growth as aggregate demand variable the lucas hypothesis is rejected in favor of friedman s 1977 hypothesis the conditional variance of monetary growth affects real output directly not through the coefficients on the forecast error term in the lucas type output equation

computing economies of vertical integration economies of scope and economies of scale using partial frontier nonparametric methods abstract so far in the nonparametric literature only full frontier nonparametric methods have been applied to search for economies of scope and scale particularly the data envelopment analysis method dea however these methods present some drawbacks that might lead to biased results this paper proposes a methodology based on more robust partial frontier nonparametric methods to look for scope and scale economies through this methodology it is possible to assess the robustness of these economies and in particular to assess the influence that extreme data or outliers might have on them the influence of the imposition of convexity on the production set of firms was also investigated this methodology was applied to the water utilities that operated in portugal between 2002 and 2008 there is evidence of economies of vertical integration and economies of scale in drinking water supply utilities and in water and wastewater utilities operating mainly in the retail segment economies of scale were found in water and wastewater utilities operating exclusively in the wholesale and in some of these utilities diseconomies of scope were also found the proposed methodology also allowed us to conclude that the existence of some smaller utilities makes the minimum optimal scales go down

the dominance of inefficiencies over scale and product mix economies in banking abstract this study measures and analyzes inefficiencies for all u s banks in 1984 inefficiencies are measured relative to a thick frontier cost function and are found to dominate measured scale and product mix economies most inefficiencies are operational in nature involving the overuse of physical inputs rather than financial involving overpayment of interest also technical inefficiencies proportionate overuse of all inputs dominate allocative inefficiencies improper mix of inputs these results suggest that competitive pressures in banking from deregulation will be focused primarily on banks that do not control costs rather than on those of a particular size or product mix

unobservable effects and business performance while unobservable factors such as corporate culture access to scarce resources management skill and luck can be postulated to be principal determinants of business success their effects are all but ignored in studies of business performance this study making use of the pims data base reports empirical evidence indicating that failure to control for unobservable factors influencing profitability both biases and exaggerates the effect of strategic factors indeed the influence of unobservable factors is so pervasive as to invalidate many of the conclusions drawn from studies failing to control for their effects

a look on the cost side market share and the competitive environment in this paper we develop a model relating market share to average costs we start with a theoretical model of the factors that affect the firm s average cost curve partitioning these factors into a measurable firm and competitive environment characteristics and b unobserved factors that are either fixed random or follow a first order autoregressive process we then link this theoretical model to an empirical model in which we specify three average cost equations for the organizational areas of purchasing production and marketing main effects for initial lagged market share position as well as their interactions with factors characterizing the firm s competitive environment represent the variables of key theoretical interest in our equations we estimate these equations using pims data and control for fixed contemporaneous and autoregressive unobservable factors our results suggest that market share can often lead to market power in the form of lower average costs however the firm s operating environment greatly moderates the effect of market share on average cost in particular we find that market share position only leads to lower average costs when the organizational unit operates in a competitive environment that gives it both motivation and ability to realize power from its market share position

customer satisfaction productivity and profitability differences between goods and services there is widespread belief that firms should pursue superiority in both customer satisfaction and productivity however there is reason to believe these two goals are not always compatible if a firm improves productivity by downsizing it may achieve an increase in productivity in the short term but future profitability may be threatened if customer satisfaction is highly dependent on the efforts of personnel if so there are potential tradeoffs between customer satisfaction and productivity for industries as diverse as airlines banking education hotels and restaurants managers in these types of service industries as well as goods industries in which the service component is increasing need to understand whether or not this is the case for example if efforts to improve productivity can actually harm customer satisfaction and vice versa the downsizing of u s and european companies should be viewed with concern it follows that developing a better understanding of how customer satisfaction and productivity relate to one another is of substantial and growing importance especially in light of expected continued growth in services throughout the world economy the objective of this paper is to investigate whether there are conditions under which there are tradeoffs between customer satisfaction and productivity a review of the literature reveals two conflicting viewpoints one school of thought argues that customer satisfaction and productivity are compatible as improvements in customer satisfaction can decrease the time andeffort devoted to handling returns rework warranties and complaint management while at the same time lowering the cost of making future transactions the second argues that increasing customer satisfaction should increase costs as doing so often requires efforts to improve product attributes or overall product design a conceptual framework useful in resolving these contradictory viewpoints is developed the framework serves in turn as a basis for developing a theoretical model relating customer satisfaction and productivity the model predicts that customer satisfaction and productivity are less likely to be compatible when 1 customer satisfaction is relatively more dependent on customization the degree to which the firm s offering is customized to meet heterogeneous customers needs as opposed to standardization the degree to which the firm s offering is reliable standardized and free from deficiencies and 2 when it is difficult costly to provide high levels of both customization and standardization simultaneously to move forward from the model s propositions to the development of testable hypotheses we argue that services are more likely than goods to have the preceding characteristics hence tradeoffs between customer satisfaction and productivity should be more prevalent for services than for goods although this classification is not precise many services are standardizable and many goods have a service component it has the advantage of allowing an initial test of the propositions the empirical work employs a database matching customer based measures of firm performance with traditional measures of business performance such as productivity and return on investment roi the central feature of this database is the set of customer satisfaction indices provided by the swedish customer satisfaction barometer scsb the scsb provides a uniform set of comparable customer based firm performance measures and offers a unique opportunity to test the study s hypotheses the findings indicate that the association between changes in customer satisfaction and changes in productivity is positive for goods but negative for services in addition while both customer satisfaction and productivity are positively associated with roi for goods and services the interaction between the two is positive for goods but significantly less so for services taken together the findings suggest support for the contention that tradeoffs are more likely for services hence simultaneous attempts to increase both customer satisfaction and productivity are likely to be more challenging in such industries of course this does not imply that such firms should not seek improvements in both productivity and customer satisfaction for example appropriate applications of information technology may improve both customer satisfaction and productivity simultaneously the findings should provide motivation for future research concerning the nature of customer satisfaction and productivity as well as appropriate strategy and tactics for each one it is worth emphasizing that this is an issue that is not only important today but certainly will become even more important in the future as the growth of services continues and world markets become increasingly competitive the importance of customer satisfaction will also increase to compete in such a world firms must strike the right balance between their efforts to compete efficiently and their efforts to compete effectively

on central bank independence and the stability of policy targets it is argued that impediments to the establishment of an independent central bank arise in the presence of unstable policy targets changing policy targets may occur with an officemotivated policymaker this differs from politico economic models where targets change depending on the partisanship of the politicians in office in the model the principal faces a tradeoff between the credibility benefits of an independent central bank and the flexibility to pursue shifts in his policy targets allowed by a regime of policy discretion an empirical section addresses the issue of the correlation between central bank independence and the stability of policy targets

some evidence on policy makers motives macroeconomic preferences and output inflation trade offs this paper presents the results of an empirical study of the relationship between macroeconomic performance and policy makers preferences for real output growth and inflation based on quarterly data from 16 countries the empirical results indicate that a lower priority to inflation and a higher real output growth target lead to higher inflation and a less favourable real output inflation trade off without affecting real output growth

efficiency decomposition and aggregation in network data envelopment analysis abstract network data envelopment analysis dea is extended from conventional dea to explore the internal structure of network production systems so that the efficiencies are measured more appropriately there are two approaches for discussing the relationships between the system and division efficiencies efficiency decomposition and efficiency aggregation this paper develops a relational model from the viewpoint of efficiency decomposition to derive the relationships between the system and division efficiencies for network systems the system efficiency can be decomposed into a weighted average of the division efficiencies adjusted by a factor and the efficiency of the system is less than the weighted average of those of the divisions the major league baseball example that has been discussed in the literature is used to illustrate the idea presented in this paper the results of the efficiency decomposition model are compared to those obtained from an efficiency aggregation model that defines the aggregate efficiency of the divisions to be the system efficiency this system efficiency is found to be very close to a measure contained in the proposed model the proposed model can thus be used for both efficiency decomposition and aggregation

measuring economies of vertical integration in network industries an application to the water sector this paper provides a framework that aims at distinguishing the technological economies of vertical integration from the vertical economies resulting from an inefficient input allocation due to upstream market imperfections to illustrate our analysis we use consistent panel data econometric methods to estimate cost functions on a sample of north american water utilities contrary to what has been found for other network industries electricity and gas for instance we show that the global and technological economies of vertical integration are not significant except for the smallest utilities

the output inflation relationship abstract this paper shows how the optimal pricing and production policy of a multiperiod profit maximizing firm under demand and output disturbances leads in the aggregate to a positive relationship between production and price deviations from the expected level as depicted by the lucas type supply function the pricing and production decisions are made simultaneously by market agents who base their decisions on the same rational expectations before the disturbances are realized here although the planned production is not affected by the price deviations there is still a contemporaneous positive relationship between them where both production and prices reflect the firm s adjustment to unexpected levels of inventory we show that this positive relationship prevails even when the production decisions are made ex ante based only on expectations before the realization of the random shocks a closed form linear approximation for the supply function is derived which captures the effect of both systematic and unsystematic economic disturbances finally we present an empirical test which supports our assertion that our inventory adjustment mechanism contributes to the creation of the positive relationship between production and price deviations

the efficiency of the public intervention on the environment evidence based on non parametric and parametric approaches abstract this paper evaluates the efficiency of the allocation of public resources aimed at complying with the european environmental directives a full and partial frontier data envelopment analysis dea is applied to a panel of decision making units i e a set of regions with a specific focus on the air water and biodiversity sectors the malmquist productivity index allows one to analyse regional productivity change while a post dea based upon simar wilson approach allows one to explore the factors that affect the performance overall a specific group of regions outperform for air water intervention while the reverse outcome is obtained for biodiversity the findings also show a rather low technological change especially for biodiversity the post dea indicates that an increase in the tourism and agricultural activity exerts a negative impact on the air water public efficiency while has a positive influence on biodiversity higher education in technical subjects also increases performance

an examination of cost subadditivity and multiproduct production in large u s banks this paper examines the subadditivity of costs for a sample of the largest commercial banks in the u s we introduce into the bank production literature the grid approach developed by evans and heckman 1984 we estimate two models of the bank cost function one where deposits are treated as outputs while in the other deposits are treated as inputs the models are estimated using the commonly used translog and the more flexible miniflex laurent viewed narrowly the findings imply that cost complementarities are not the raison d etre for multiproduct production in the largest commercial banks subadditive costs however are sufficient but not necessary for multiproduct production it is quite possible for multiproduct production to be optimal when output are produced independently levy and haber 1986 and teece 1980 1982 it is only required that inputs be shareable as opposed to joint copyright 1990 by ohio state university press

economies of diversification in the banking industry abstract this paper defines a new measure economies of diversification to examine the cost effect of product line expansion this measure is a special case of expansion path subadditivity and contains economies of scope as a special case a nonparametric frontier technique which isolates the effects of inefficiency and scale is used to measure economies of diversification applied to a set of 468 u s depository institutions operating in 1984 we find slight diseconomies of diversification diseconomies of diversification and inefficiency due to the overutilization of resources are found to be more important determinants of bank costs than is the failure to operate at optimal scale

technical scale and allocative efficiencies in u s banking an empirical investigation a nonparametric frontier approach is used to calculate the overall technical pure technical allocative and scale efficiencies for a sample of 322 independent banks the sample was drawn from the federal deposit insurance corporation tapes on the reports of condition and reports of income call reports for the year 1986 the results indicated a low level of overall efficiency the main source of inefficiency was technical in nature rather than allocative separate efficiency frontiers were constructed to test the effect of branching however the distributions of efficiency measures for branching and non branching banks were not found to be different

changes in the cost of intermediation the case of savings and loans the minimum cost output configuration for a firm may change as the result of a variety of factors including changes in market structure in this paper we test this structural change hypothesis with savings and loan data we find support for the hypothesis that separable constant returns to scale production functions characterize the average savings and loan in our sample in 1983 this is in contrast to the cost complementarities found in 1978 we argue that this result may be the result of regulatory changes that allowed savings and loans to alter their production mix to fully capture the benefits of joint production it seems reasonable to assume that the cost minimizing configuration of a multiproduct firm is potentially subject to nonstationarity during periods of structural change in input and or output markets the late 1970s and early 1980s represent such a period of turbulence for many markets in the financial services industry volatile interest rates combined with technological and regulatory changes may have caused firms in this industry to alter their output mixes in an effort to capture cost complementarities from joint production the purpose of this paper is to test this hypothesis of structural change in the savings and loan industry using both a translog and minflex laurent translog mlt specification of the production function we have chosen to investigate savings and loans s ls during the late 1970s and early 1980s for two reasons first s ls provide an ideal vehicle for testing our hypothesis because they were restricted almost exclusively to mortgages and securities as outputs before the passage of the depository institutions deregulation and monetary control act of 1980 and the garn st germain act of 1982 moreover there were also market changes with respect to both the pricing and mix of inputs i e deposits our second rationale involves the fact that there is a large and growing body of literature in the area of what is now called the

economies of scope in the health sector the case of portuguese hospitals abstract background economies of scope are defined as the potential cost savings arising from the joint production of two or more outputs rather than their separate production given the importance of the health sector for the community measuring the existence of potential economies of scope contributes to the improvement of this sectors sustainability objective s to identify economies of scope in portuguese hospitals using frontier based methods methods this paper develops 1 a generalized algorithm to obtain locally convex frontiers using the directional order ldo frontier method and 2 a generalized economies of scope based ratio that allows the introduction of any inefficiency source data this paper uses the 2002 2009 dataset for portuguese hospitals concerning the provision of obstetrics gynaecology and paediatrics ogp and psychiatric psy services results considerable economies and diseconomies of scope were found in the portuguese public hospitals a considerable dependence on the production line and on the merger status of the hospital was observed diseconomies of scope were more likely for larger hospitals i e those with more than 6000 inpatient discharges and or 7500 medical appointments per year conclusions even merged hospitals can exploit economies of scope however when they become outsized entities such efforts become more difficult

a scale elasticity measure for directional distance function and its dual theory and dea estimation abstract in this paper we focus on scale elasticity measure based on directional distance function for multi output multi input technologies explore its fundamental properties and show its equivalence with the input oriented and output oriented scale elasticity measures we also establish duality relationship between the scale elasticity measure based on the directional distance function with scale elasticity measure based on the profit function finally we discuss the estimation issues of the scale elasticity based on the directional distance function via the dea estimator

driving forces for consolidation or fragmentation of the us water utility industry a cost function approach with endogenous output abstract this paper empirically analyzes the structure of the us water industry using a multiproduct flexible cost function model with the amount of water delivered to final consumers recognized as endogenous the cross sectional econometric analysis focuses on measures of cost economies in water production and their variation with network characteristics the estimates reveal considerable scale economies in terms of volume particularly for small utilities that tend to have less output density these economies are however counteracted by simultaneous increases in customers and service area size especially for large utilities overall our results indicate that consolidation of small utilities might generate cost efficiencies depending on the concurrent expansion of the network but consolidation of already large utilities without corresponding increases in output density is not likely to be cost effective

a note on savings and loan ownership structure and expense preference a re examination this study extends the work of akella and greenbaum journal of banking finance 12 1988 419 through the use of a much larger nationwide sample of us saving and loan associations and supports their original finding of significant expense preference behavior in mutual savings and loans during their original study period 1979 80 this study also provides evidence that over the time period of substantial deregulation and changes in the competitive environment in the us financial services industry expense preference behavior for savings and loans decreased the results are consistent with the idea that the removal of barriers that restrict competition should improve managerial efficiency in firms that survive 2003 elsevier b v all rights reserved

identifying generalizable effects of strategic actions on firm performance the case of demand side returns to r d spending this paper provides an approach for assessing generalizable effects of strategic actions on firm performance we identify five key issues that need to be addressed before one can have confidence in the obtained strategic generalization in addition we suggest a methodology for attacking each of these five issues we then illustrate this framework using the example of demand side returns to r d spending we document two empirical generalizations in this research first and foremost we show that demand returns to r d spending depend on whether the firm has ability and motivation to take advantage of the r d investment thus only firms with high ability and motivation leverage the r d investment into monopoly rents in the form of subsequent price increases second we show that the concept of a firm needing both ability and motivation to sustain returns from a strategic action generalizes across strategic actions we make two other conclusions about empirical approaches to strategy research first to pro

information costs learning process and the effectiveness of monetary policy the lucas cukierman model is modified to allow for agents imperfect knowledge of the key money supply parameter and to make the extent of information acquisition by agents endogenous a bayesian framework is used and the effectiveness of monetary policy during the learning process is also examined

sustainable pioneering advantage profit implications of market entry order there is strong theoretical and empirical evidence supporting the idea that first to market leads to an enduring market share advantage in sharp contrast to these findings we find that at the business unit level being first to market leads on average to a long termprofit disadvantage this result holds for a sample of consumer goods as well as a sample of industrial goods and leads to questions about the validity of first mover advantage in and of itself as a strategy to achieve superior performance we replicate the typical demand side pioneering advantage but find an evengreater average cost disadvantage which is the source of the pioneering profit disadvantage in an extended analysis we show that first to market leads to aninitial profit advantage which depending on the sample or profit measure lasts for about 12 to 14 years before turning into a disadvantage moreover we show that pioneers differentially benefit from a lack of consumer learning a strong market position and patent protection these three moderating factors together can actually help pioneers achieve a sustainable profit advantage over later entrants finally we find strong support for the theoretical argument that the entry order decision should be treated as endogenous in empirical estimation

efficiency in the commercial banking industry a production frontier approach 1990 efficiency in the commercial banking industry a production frontier approach applied economics vol 22 no 4 pp 539 551

choosing among alternative cost function specifications an application to italian multi utilities abstract the paper investigates the cost properties of a sample of italian utilities providing in combination gas water and electricity services the estimates from a multi product composite cost function rev econ stat 74 1992 221 are compared with the ones coming from other traditional functional forms such as the standard translog st the generalized translog gt and the separable quadratic sq the results show that the composite model provides a better description of data and highlight the presence of global scope and scale economies for the median firm of the sample

chapter 17 marketing strategy models publisher summary despite the advances in the sophistication and proliferation of marketing science models relatively few true marketing strategy models have been developed and those that have been developed generally had limited impact on management the gap between management needs for models that help them generate evaluate and implement better marketing strategies and the available models especially non traditional is narrowing as the environment and the characteristics of successful businesses are changing the nature of the marketing paradigm and the nature of desired marketing strategy models is changing as well

demand driven innovation and spatial competition over time the demand pull hypothesis regarding the process underlying innovation emphasizes a top down approach the initiation of an innovation is seen as coming from the firm s marketing or production people and the response as coming from the research staff the problem may be posed by members of the firm that deal directly with its customers or are involved with the manufacture of its products and a solution is provided by the research staff the alternative technology push hypothesis emphasizes a bottom up approach and has the research staff playing the active role of determining the nature of the innovation with the marketing and production staff playing a passive role it seems that neither hypothesis alone can account for the direction of innovative activity it is the interaction of technological opportunity and economic opportunity that is of ultimate importance moreover technological opportunity is judged to be responsible for the long run evolution of products while economic opportunity appears to account for more of the short run developments kamien and schwartz 1982