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Efficiency measures for industrial organization

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The aim of the paper is to measure the efficiency of an industry, and to
decompose it in firm efficiencies—which indicate how close firms approximate best
practices—and an organization efficiency—which indicates the degree of optimality
of the number of firms and their distribution. The latter component provides an
efficiency measure for the industrial organization. Economies or diseconomies of
scale and of scope play a big role in the determination of the optimal industrial
organization and the consequent measurement of the efficiency of an observed
industry. Different approaches to the modeling of scale economies will be reviewed.
The paper shows in detail how the efficiency of an industrial organization can be
measured as a gap between mean firm efficiency and overall industry efficiency. The
analysis is extended to dynamic models, to measure the role of entry and exit in the
efficiency of the industrial organization.
Original languageEnglish
Title of host publicationBenchmarking for Performance Evaluation
Subtitle of host publicationA Production Frontier Approach
EditorsSubhash C. Ray , Subal C. Kumbhakar, Pami Dua
Place of PublicationNew Delhi
PublisherSpringer India
Pages221-250
ISBN (Print)9788132222521
StatePublished - 2015
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