Measuring the Effects of Price Environment: An Application to U.S. Industries

Abstract : Our study proposes a methodology for emphasizing price environment in a nonparametric setting. Compared to traditional allocative efficiency, our measure does not require resources reallocation at the firm level. Moreover, it supposes a comparison of prices among peers. Total price effect is obtained by calculating the ratio between technical efficiency scores obtained with quantity-based data and value efficiency scores obtained with value-based data. This methodology can be extended in order to obtain output-?and input-specific price effects. An application is proposed to study price environments for U.S. industries over the period?1987-2014.