Controlling for environmental conditions in regulatory benchmarking
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- Controlling for environmental conditions in regulatory benchmarking _ Elsevier Enhanced Reader
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Regulators often use Data Envelopment Analysis (DEA) to create a pseudo-competitive environment for sectors with natural monopolies. In this paper, we look at the characteristics of the method used by the Danish water regulator to account for differences in the companies’ environmental conditions and propose adjustments to this method. Second stage analysis reveals significant correlations between the efficiency scores and these external factors, indicating that the currently used method is insufficient. To explain this, we develop a new second stage analysis, using permutation-based approaches, where we account for the distribution of the DEA assigned multipliers.
Original language | English |
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Article number | 101390 |
Journal | Utilities Policy |
Volume | 77 |
Number of pages | 13 |
ISSN | 0957-1787 |
DOIs | |
Publication status | Published - 2022 |
Bibliographical note
Publisher Copyright:
© 2022 The Authors
- Data envelopment analysis, Environmental variables, Permutation, Regulation, Second stage analysis
Research areas
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