Omega-international journal of management science vol:35 issue:3 pages:335-349
Lack of information about technology and prices often hampers the empirical assessment of the profit maximization hypothesis (viz. by measuring the degree of profit efficiency). The non-parametric Data Envelopment Analysis (DEA) methodology can deal with such incomplete information. We exploit the implicit but largely neglected profit interpretation of the DEA model that builds on assumptions of monotone and convex production possibility sets. We show how its embedded assessment of necessary conditions for profit maximization can be strengthened given partial information in the form of monetary sub-cost/-revenue data (that are often easier obtained than the pure quantity data). Finally, we argue that a mix efficiency analysis is naturally complementary to such a profit efficiency analysis. An application to German farm types complements our methodological discussion. By using non-parametric statistical tests, we further demonstrate the potential of the nonparametric approach in deriving strong and robust statistical evidence while imposing minimal structure on the setting under study. In particular, we look for significant efficiency variation over regions. (c) 2005 Elsevier Ltd. All rights reserved.