![]() ![]() Another useful application of the cost frontiers derived from a DEA model is to measure the relative productivity contribution of strategic inputs like research and development (R&D) spending, advertisement, and net capital expenditure. Cost efficiency also incorporates market prices of inputs and their impact on growth of firms. For profit-based industries cost minimization criteria may be applied even when there is increasing returns to scale in the production process. Nonparametric cost efficiency models in data envelopment analysis (DEA) are more flexible in the sense that cost data are usually available even for public sector (nonprofit) enterprises and overall cost minimization may be used as an efficiency criterion, where output price data are not available. ![]()
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