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On the Technically Efficient Organization of an Industry: A Study of U.S. Airlines

SUBHASH C. RAY and XIAOWEN HU
Journal of Productivity Analysis
Vol. 8, No. 1 (March 1997), pp. 5-18
Published by: Springer
Stable URL: http://www.jstor.org/stable/41769940
Page Count: 14
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On the Technically Efficient Organization of an Industry: A Study of U.S. Airlines
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Abstract

In nonparametric analysis of production efficiency, the focus of attention is typically on the individual firm. In this article, we evaluate efficiency in resource utilization at the industry level. We propose an integer programming model to measure the extent of input saving possible if the observed output level of the industry is allocated to an optimal number of identical firms. This approach is applied to data for U.S. airlines covering the period 1970-84. Our results confirm that there were too few airlines prior to deregulation and suggest that there were too many firms during the early years of the post-deregulation era.

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