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Cost-effectiveness analysis (CEA) is a form of economic analysis that compares the relative costs and outcomes (effects) of different courses of action. Cost-effectiveness analysis is distinct from cost–benefit analysis , which assigns a monetary value to the measure of effect. [ 1 ]
Data envelopment analysis (DEA) is a nonparametric method in operations research and economics for the estimation of production frontiers. [1] DEA has been applied in a large range of fields including international banking, economic sustainability, police department operations, and logistical applications [2] [3] [4] Additionally, DEA has been used to assess the performance of natural language ...
Pareto efficiency does not require a totally equitable distribution of wealth, which is another aspect that draws in criticism. [31] An economy in which a wealthy few hold the vast majority of resources can be Pareto-efficient. A simple example is the distribution of a pie among three people.
In economics, allocative efficiency entails production at the ... For example, an economist might ... Allocative efficiency is the main tool of welfare analysis to ...
In microeconomics, economic efficiency, depending on the context, is usually one of the following two related concepts: [1] Allocative or Pareto efficiency : any changes made to assist one person would harm another.
It is also a justification for free trade policies, since some economies of scale may require a larger market than is possible within a particular country—for example, it would not be efficient for Liechtenstein to have its own carmaker if they only sold to their local market. A lone carmaker may be profitable, but even more so if they ...
The Kaldor–Hicks criterion is widely applied in game theory's non-zero sum games, such as DOTMLPF, welfare economics, and managerial economics. For example, it forms an underlying rationale for cost–benefit analysis. In cost–benefit analysis, a project (for example, a new airport) is evaluated by comparing the total costs, such as ...
Stochastic frontier analysis has examined also "cost" and "profit" efficiency. [2] The "cost frontier" approach attempts to measure how far from full-cost minimization (i.e. cost-efficiency) is the firm. Modeling-wise, the non-negative cost-inefficiency component is added rather than subtracted in the stochastic specification.