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Water 2016, 8(3), 82; doi:10.3390/w8030082

Computing Economies of Scope Using Robust Partial Frontier Nonparametric Methods

1
LAMEMO Laboratory/COPPE/Federal University of Rio de Janeiro, Ilha do Fundão, P.B. 68506, 21945-970 Rio de Janeiro, Brazil
2
CESUR, CERIS, Instituto Superior Técnico, Universidade de Lisboa, Av. Rovisco Pais, 1049-001 Lisbon, Portugal
These authors contributed equally to this work.
*
Author to whom correspondence should be addressed.
Academic Editor: Andreas N. Angelakis
Received: 19 December 2015 / Revised: 15 February 2016 / Accepted: 26 February 2016 / Published: 4 March 2016
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Abstract

This paper proposes a methodology to examine economies of scope using the recent order-α nonparametric method. It allows us to investigate economies of scope by comparing the efficient order-α frontiers of firms that produce two or more goods with the efficient order-α frontiers of firms that produce only one good. To accomplish this, and because the order-α frontiers are irregular, we suggest to linearize them by the DEA estimator. The proposed methodology uses partial frontier nonparametric methods that are more robust than the traditional full frontier methods. By using a sample of 67 Portuguese water utilities for the period 2002–2008 and, also, a simulated sample, we prove the usefulness of the approach adopted and show that if only the full frontier methods were used, they would lead to different results. We found evidence of economies of scope in the provision of water supply and wastewater services simultaneously by water utilities in Portugal. View Full-Text
Keywords: economies of scope; partial frontier nonparametric methods; efficiency; data envelopment analysis economies of scope; partial frontier nonparametric methods; efficiency; data envelopment analysis
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Carvalho, P.; Cunha Marques, R. Computing Economies of Scope Using Robust Partial Frontier Nonparametric Methods. Water 2016, 8, 82.

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