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Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - A generalized inefficiency model with input and output dependence
AU - Tsionas, Mike G.
PY - 2024/1/1
Y1 - 2024/1/1
N2 - In this paper we propose a general inefficiency model, in the sense that technical inefficiency is, simultaneously, a function of all inputs, outputs, and contextual variables. We recognize that change in inefficiency is endogenous or rational, and we propose an adjustment costs model with firm-specific but unknown adjustment cost parameters. When inefficiency depends on inputs and outputs, the firm's optimization problem changes as the first order conditions must take into account the dependence of inefficiency on the endogenous variables of the problem. The new formulation introduces statistical challenges which are successfully resolved. The model is estimated using Maximum Simulated Likelihood and an empirical application to U.S. banking is provided.
AB - In this paper we propose a general inefficiency model, in the sense that technical inefficiency is, simultaneously, a function of all inputs, outputs, and contextual variables. We recognize that change in inefficiency is endogenous or rational, and we propose an adjustment costs model with firm-specific but unknown adjustment cost parameters. When inefficiency depends on inputs and outputs, the firm's optimization problem changes as the first order conditions must take into account the dependence of inefficiency on the endogenous variables of the problem. The new formulation introduces statistical challenges which are successfully resolved. The model is estimated using Maximum Simulated Likelihood and an empirical application to U.S. banking is provided.
KW - Information Systems and Management
KW - Management Science and Operations Research
KW - Modeling and Simulation
KW - General Computer Science
KW - Industrial and Manufacturing Engineering
U2 - 10.1016/j.ejor.2023.06.029
DO - 10.1016/j.ejor.2023.06.029
M3 - Journal article
VL - 312
SP - 315
EP - 323
JO - European Journal of Operational Research
JF - European Journal of Operational Research
SN - 0377-2217
IS - 1
ER -