Two-dimensional efficiency decomposition to measure the demand effect in productivity analysis
Journal
European Journal of Operational Research
Journal Volume
216
Journal Issue
3
Pages
584-593
Date Issued
2012
Author(s)
Johnson, A.L.
Abstract
This paper proposes a two-dimensional efficiency decomposition (2DED) of profitability for a production system to account for the demand effect observed in productivity analysis. The first dimension identifies four components of efficiency: capacity design, demand generation, operations, and demand consumption, using Network Data Envelopment Analysis (Network DEA). The second dimension decomposes the efficiency measures and integrates them into a profitability efficiency framework. Thus, each component's profitability change can be analyzed based on technical efficiency change, scale efficiency change and allocative efficiency change. An empirical study based on data from 2006 to 2008 for the US airline industry finds that the regress of productivity is mainly caused by a demand fluctuation in 2007-2008 rather than technical regression in production capabilities. © 2011 Elsevier B.V. All rights reserved.
SDGs
Type
journal article