Optimal Paths and Costs of Adjustment in Dynamic DEA Models: With Application to Chilean Department Stores

De Mateo, Filadelfo, Coelli, Tim J. and O'Donnell, Chris J. (2006) Optimal Paths and Costs of Adjustment in Dynamic DEA Models: With Application to Chilean Department Stores. Annals of Operations Research, 145 1: 211-227. doi:10.1007/s10479-006-0034-7


Author De Mateo, Filadelfo
Coelli, Tim J.
O'Donnell, Chris J.
Title Optimal Paths and Costs of Adjustment in Dynamic DEA Models: With Application to Chilean Department Stores
Journal name Annals of Operations Research   Check publisher's open access policy
ISSN 0254-5330
1572-9338
Publication date 2006-07-01
Sub-type Article (original research)
DOI 10.1007/s10479-006-0034-7
Volume 145
Issue 1
Start page 211
End page 227
Total pages 17
Editor P. L. Hammer
Place of publication Netherlands
Publisher Springer
Language eng
Subject C1
340299 Applied Economics not elsewhere classified
720404 Productivity
Abstract In this paper we propose a range of dynamic data envelopment analysis (DEA) models which allow information on costs of adjustment to be incorporated into the DEA framework. We first specify a basic dynamic DEA model predicated on a number or simplifying assumptions. We then outline a number of extensions to this model to accommodate asymmetric adjustment costs, non-static output quantities, non-static input prices, and non-static costs of adjustment, technological change, quasi-fixed inputs and investment budget constraints. The new dynamic DEA models provide valuable extra information relative to the standard static DEA models-they identify an optimal path of adjustment for the input quantities, and provide a measure of the potential cost savings that result from recognising the costs of adjusting input quantities towards the optimal point. The new models are illustrated using data relating to a chain of 35 retail department stores in Chile. The empirical results illustrate the wealth of information that can be derived from these models, and clearly show that static models overstate potential cost savings when adjustment costs are non-zero.
Keyword Cost of adjustment
Dynamic DEA
Path of adjustment
Q-Index Code C1

Document type: Journal Article
Sub-type: Article (original research)
Collections: Excellence in Research Australia (ERA) - Collection
2007 Higher Education Research Data Collection
School of Economics Publications
 
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Created: Wed, 15 Aug 2007, 16:58:43 EST