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Considering R, = p,y. and Ci = w;x;, where p, and w; are assumed equal across all units the equivalence between this model and the maximum profit model (2) can be easily proved (we omit the proof here for sake of brevity).

Figure 1 Considering R, = p,y. and Ci = w;x;, where p, and w; are assumed equal across all units the equivalence between this model and the maximum profit model (2) can be easily proved (we omit the proof here for sake of brevity).

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Inputs and outputs to assess profit efficiency The measurement and decomposition of profit efficiency follows the approach outlined in Section 2, and uses the input and output variables listed in Table 1. These variables are consistent with the intermediation approach of bank branches’ activities as discussed in Athanassopoulos (1997) and Berger et al. (1997). Apart from the ‘quantity’ variables specified in Table 1, price data were also available for staff (average salaries) and for all the outputs. We used the variables in Table 1 to compute two types of efficiency:
Inputs and outputs to assess profit efficiency The measurement and decomposition of profit efficiency follows the approach outlined in Section 2, and uses the input and output variables listed in Table 1. These variables are consistent with the intermediation approach of bank branches’ activities as discussed in Athanassopoulos (1997) and Berger et al. (1997). Apart from the ‘quantity’ variables specified in Table 1, price data were also available for staff (average salaries) and for all the outputs. We used the variables in Table 1 to compute two types of efficiency:
Descriptive statistics of our data for April Table 2
Descriptive statistics of our data for April Table 2
Targets of branch B8 As mentioned before, overall profit efficiency and allocative profit efficiency can be higher than 1. This situation happened only for one bank branch in our sample (B28) as can be seen in Table 4. Branch B28 is technically efficient, and no scale effects can be identified in moving from the observed level of inputs and outputs of B28 to those of the maximum profit branch (B16). This means that all overall profit inefficiency of B28 is explained by allocative inefficiency, which reflects very dissimilar product mixes between these two branches. In order to better understand why allocative efficiency is in excess of one for B28, consider an
Targets of branch B8 As mentioned before, overall profit efficiency and allocative profit efficiency can be higher than 1. This situation happened only for one bank branch in our sample (B28) as can be seen in Table 4. Branch B28 is technically efficient, and no scale effects can be identified in moving from the observed level of inputs and outputs of B28 to those of the maximum profit branch (B16). This means that all overall profit inefficiency of B28 is explained by allocative inefficiency, which reflects very dissimilar product mixes between these two branches. In order to better understand why allocative efficiency is in excess of one for B28, consider an
Results for all branches under analysis
Results for all branches under analysis
Table 4 (continued)
Table 4 (continued)
Constrained targets for branch B8 ee a as We did not show in Table 6 the decomposition of allocative efficiency into its mix and scale effect because in the constrained model technical efficient projections (as resulting from model (9)) do not necessarily lie on the Pareto-efficient frontier. This means that a movement from the technical projection to the maximum profit point is not necessarily a movement along the production frontier and therefore the scale concept loses its meaning.
Constrained targets for branch B8 ee a as We did not show in Table 6 the decomposition of allocative efficiency into its mix and scale effect because in the constrained model technical efficient projections (as resulting from model (9)) do not necessarily lie on the Pareto-efficient frontier. This means that a movement from the technical projection to the maximum profit point is not necessarily a movement along the production frontier and therefore the scale concept loses its meaning.
Short run results for all branches under analysis
Short run results for all branches under analysis
Table 6 (continued) Conclusion
Table 6 (continued) Conclusion
Related topics:
Data Envelopment AnalysisAllocative EfficiencyProfit EfficiencyBank Branches
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