Handling losses in translog profit models

Bos, J.W.B. and Koetter, M. (2006): Handling losses in translog profit models.

Abstract

In this paper, we compare standard approaches used to handle losses in logarithmic stochastic profit frontier models with a simple novel approach. We discuss discriminatory power, rank stability and precision of profit efficiency scores. Our new method enhances rank stability and discriminatory power, and improves the precision of profit efficiency scores.

• Item Type: MPRA Paper
• Institution: Utrecht School of Economics
• Language: English
• Keywords: profit efficiency; stochastic frontier analysis; truncation and censoring
• Subjects: L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L23 - Organization of Production; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C24 - Truncated and Censored Models ; Switching Regression Models ; Threshold Regression Models; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

References

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