Production Efficiency with the Stochastic Management Model
This monograph presents a method for resolving the issue of which distribution to assume when estimating the technical efficiency of industries using the stochastic production frontier model. Other studies use methods that rely on specific industry data, but this method identifies and resolves the distribution type by comparing data across many industries. A unique aspect highlighted here is the notion that by considering the distribution of inefficiency as a result of the asymptotic distribution derived from a specific stochastic process of firm productivity, it is possible to discern whether the technical inefficiency arises from some irrational decision making within the firms, indicated by the information on the inefficiency generating mechanism provided by the distribution parameters. This research clearly demonstrates the relationship between the econometric method of the stochastic production frontier model and Leibenstein's theory of X-inefficiency. The method proposed in this book is applied to data from Japanese firms, confirming that the observed variance in productivity within Japanese industries cannot be denied as the result of irrational decision making by firms.
Akio Torii is a researcher at the Institute of Economic Research, Chuo University, Hachiouji, Japan, and Professor Emeritus at both Chuo University and Yokohama National University, Yokohama, Japan. His extensive work includes authoring and co-editing in the fields of Industrial Organization, both Theory and Empirical, with a focus on productivity/efficiency analysis in manufacturing, energy sector analysis, utility regulation, retail/wholesale distribution sectors, logistic industries, non-life insurance industries, and dynamic macro-distribution theories. Notable recognitions include the Best Paper Award from the European Media Management Association (2016) and the Japan Society of Marketing and Distribution (2007). He has also contributed to numerous research committees for public organizations like the Ministry of Internal Affairs and Communications, Ministry of Economy, Trade and Industry, the Japan Fair Trade Commission, and Central Research Institute of Electric Power Industry beside many other institutions.
