Internet Based Benchmarking

We discuss the design of interactive, internet based benchmarking using parametric (statistical) as well as non-parametric (DEA) models. The user receives benchmarks and improvement potentials. The user is also given the possibility to search different efficiency frontiers and hereby to explore alternative improvement strategies. Implementations of both a parametric and a non-parametric model are presented.     

DEA and Activity Planning under Asymmetric Information

The productivity analysis literature has traditionally focused on the evaluation of past performances. In this paper, we consider the post productivity analysis problem of deciding which production plans to choose in the future given information from a productivity analysis. In particular, we demonstrate that Data Envelopment Analysis (DEA) has an important role to play in the reallocation game following a normal productivity analysis. DEA estimates reduce the information rents an agent can extract by claiming high costs for the least reduced or most expanded activity. We also examine how to optimally combine DEA estimates with other information in a planning context, including preference information, ex-ante cost reports and ex-post cost data.     

DEA and Dynamic Yardstick Competition in Scandinavian Electricity Distribution

Multi-period multi-product regulatory schemes for electricity distributors are presented, based on cost information from a productivity analysis model and an agency theoretical decision model. The proposed schemes are operational and demonstrate considerable advantages compared to the popular CPI-X revenue cap regulation. The schemes avoid arbitrariness, excessively high or negative informational rents as well as ratchet effects and they promote rapid productivity catch-up by making full use of available data. More generally, the paper contributes to the theoretical unification between firm-based Data Envelopment Analysis (DEA) productivity models and micro-economic reimbursement theories.JEL Classification: D24, D82, L12, L51, L94     

Gains from quota trade: theoretical models and an application to the Danish fishery

We provide a framework for evaluating potential effects of introducingtradable quotas to a sector. The effects depend on the economiesof scale and scope of the production technology, and on firms'ability and willingness to learn best practice methods (catchingup) and to change their input and output composition (mix).To illustrate our approach, data from the Danish fishery areused to calculate the potential gains from introducing individuallytransferable fishing quotas. Data envelopment analysis is usedto model the production technology. We find that pure reallocationis as important as pure learning, i.e. quota reallocation withoutcatching-up is as valuable as learning best practice with fixedallocations.     

Information systems, incentives and the timing of investments

The purpose of this paper is to study the effects of introducing information systems into a model featuring managerial incentive problems and investment opportunities that are mutually exclusive over time. In a principal-agent model in which a manager (agent) has superior information about investment costs, we introduce information systems, the signals from which are available to both the manager and the owner of the investment opportunity, which allow the owner to decrease the manager's informational advantage.We examine (i) the characteristics of the optimal information systems; (ii) the effects of such information systems on the owner's investment and compensation choices and on the value of the investment opportunity to the owner; (iii) the effects of such information systems on the timing of investment; (iv) the effects of such information systems on the overall probability of investment; and (v) when the owner might want to improve the information system at a particular point in time.     

Reallocating sugar beet contracts: can sugar production survive in Denmark?

The reform of the EU sugar regime involves significant pricereductions for sugar and sugar beet. We examine whether theDanish sugar industry can maintain production and profit levelsby reallocating production from less to more efficient farmers.The impact of alternative reallocation mechanisms is estimatedusing a DEA model of sugar beet production, together with informationabout processing capacity at the three Danish plants, beet transportationcosts and alternative crop options. The analysis shows thatthe present allocation is far from efficient. With the new reformfully implemented and the quota efficiently reallocated, actualproduction will fall by only 25 per cent, although profit willbe substantially lower.     

Efficiency Evaluations Based on Potential (Non-Proportional) Improvements

Efficiency evaluation of a Decision Making Unit (DMU) involves two issues: 1) selection of an appropriate reference plan against which to evaluate the DMU and 2) measurement of performance slack. In the literature, these issues are mixed in one and the same operation but we argue that it has theoretical as well as practical advantages to separate them. We provide an axiomatic characterization of the implicit Farrell selection. This approach, ignores important aspects of the technology by focussing on proportional variations in inputs (or outputs). We propose a new approach where potential improvements are used to guide the selection of reference plans. A characterization of this approach is provided and an associated translation invariant, strictly monotonous and continuous efficiency index is suggested.     

Incentives, Information Systems, and Competition

We investigate how different competitive regimes affect the ability to provide incentives based on noisy information systems. The set-up involves multiple producers and processors in the presence of moral hazard and adverse selection. Reduced competition may facilitate incentive provision by allowing more high-powered incentives. This may rationalize both vertical and horizontal integration as seen in many agricultural markets with uncertain quality grading. On the other hand, if trading terms are settled before the information is observed, a noisy information system may suffice to give proper incentives. This may rationalize the use of long-term conditional price contracts in the trading of many agricultural products.