Peter Bogetoft

Copenhagen Business School · Department of Economics

Innovation is often seen as crucial for firm survival and as a way for firms to differentiate themselves from their rivals. However, innovation studies are vague about the actual importance of different innovation strategies. In this study, we distinguish between pure product, process, organizational, and marketing innovations and their combination...

Data Envelopment Analysis (DEA) allows us to capture the complex relationship between multiple inputs and outputs in firms and organizations. Unfortunately, managers may find it hard to understand a DEA model and this may lead to mistrust in the analyses and to difficulties in deriving actionable information from the model. In this paper, we propos...

Can inefficiency be rational? Excess resources or slack may serve as a buffer against environmental shocks, help decouple organizations, ease planning and implementation, support innovation, and enable effective responses to competitors. Slack may however also be the result of inefficiency. In Bogetoft and Kerstens, Distinguishing useful and wastef...

Data Envelopment Analysis (DEA) allows us to capture the complex relationship between multiple inputs and outputs in firms and organizations. Unfortunately, managers may find it hard to understand a DEA model and this may lead to mistrust in the analyses and to difficulties in deriving actionable information from the model. In this paper, we propos...

In modelling the relative performance of a set of Decision Making Units (DMUs), a common challenge is to account for heterogeneity in the services they provide and the settings in which they operate. One solution is to include many features in the model and hereby to use a one-fits-all model that is sufficiently complex to account for this heteroge...

The Patent Holder wishing to enforce her patent has several ways of doing so. In the world of patent litigation, however, one of the most important remedies is the preliminary injunction (PI), whereby an allegedly infringing competitor is forced to stop selling the goods in the market in the interim period before the court reaches its final decisio...

In many markets there is some form of regulation; and when new policy measures are introduced into a particular sector, the question of how to structure an adequate regulatory process arises. This paper contributes to the literature by describing the approach taken in the nursing home sector in the Netherlands, explaining all the steps needed for i...

Data Envelopment Analysis (DEA) based cost norms are wide used in the regulation of natural monopolies like water, electricity, and gas networks. In the typical application, demand is considered fixed and non-controllable (non-discretionary), and the challenge is to incentivize the monopoly to provide the demanded services at least costs. In this p...

The greenhouse gases (GHG) emissions in the European Union (EU) are mainly caused by human activity from five sectors-power, industry, transport, buildings, and agriculture. To tackle all these challenges, the EU actions and policies have been encouraging initiatives focusing on a holistic approach but these initiatives are not enough coordinated a...

Background Achieving universal health coverage (UHC) is a global priority and a keystone element of the 2030 Sustainable Development Goals. However, COVID-19 is causing serious impacts on tax revenue and many countries are facing constraints to new investment in health. To advance UHC progress, countries can also focus on improving health system te...

In the regulation of natural monopolies such as regional utilities, several goals must be balanced. In this paper, we focus on the trade-off between information rents and service differentiation. Consumers in different regions may prefer different service levels and service mixes. The services provided should therefore ideally be aligned with the p...

The forestry sector is constantly looking for ways for making data-driven decisions and improving efficiency. The application of Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA) allow the users to go beyond looking at simple key performance indicators. Benchmarking is one of the most common tools in business for improving effi...

In this paper, we consider a downstream firm negotiating with an upstream firm, and we investigate the impact of the organizational form of the upstream firm. We show that if the upstream firm is organized like a traditional cooperative, where the members have free delivery rights and where surplus is shared in proportion to the deliveries, the dow...

In practice, the calculation of workloads in different entities and the allocation of resources between such entities is often done using simple task weighting models. Different tasks are assigned weights and the total workload is the weighted sum of the tasks performed. Traditional approaches for establishing the weights, including the using of De...

This paper uses Data Envelopment Analysis (DEA) to evaluate how the technical efficiency of forest harvesting operations is influenced by terrain conditions and forest attributes, in addition to exploring the existence of other influencing factors. To this end, 643 shift-level observations of harvesting operations on 253 distinct harvested sites we...

In many applications of data envelopment analysis, there are situations in which a central body manages a large set of similar units delivering some services. In such multi-unit organizations, the central management desires a mechanism by which the local management of each unit is incentivized to perform towards the improvement of the performance o...

TCB18 is an initiative on behalf of the Council of European Energy Regulators (CEER), involving 46 operators from 16 countries in Europe. A DEA-based benchmarking model for 2017 is developed, assuring comparability among observations emanating from operators with differences in organization, task scope and asset base. This challenge is addressed by...

This paper proposes an integrative approach to feature (input and output) selection in Data Envelopment Analysis (DEA). The DEA model is enriched with zero-one decision variables modelling the selection of features, yielding a Mixed Integer Linear Programming formulation. This single-model approach can handle different objective functions as well a...

This paper proposes an integrative approach to feature (input and output) selection in Data Envelopment Analysis (DEA). The DEA model is enriched with zero-one decision variables modelling the selection of features, yielding a Mixed Integer Linear Programming formulation. This single-model approach can handle different objective functions as well a...

The construction of a proxy measure for grid size, the normalized grid (NormGrid) is based on relative ratios for capital and operating expenditure per asset type. In addition, environmental conditions are taken into consideration when estimating the overall comparable size of the grid asset base. This technical report describes a) The construction...

The paper deals with benchmarking cases where highly aggregated decision making units are part of the data set. It is shown that these units – consisting of sub-units which are not further known by the evaluator – are likely to receive an unjustifiable harsh evaluation, here referred to as aggregation bias. To counter this bias, we present an appro...

In most organizations, the agent has superior information about the relative costs of different products or activities. This handicaps the principal when the principal seeks to adjust the product mix. Our main conceptual finding is that there is “mix stickiness.” The agent’s superior information about the relative costs of different products or act...

State-of-the-art benchmarking methods, and in particular data envelopment analysis (DEA) and stochastic frontier analysis (SFA), are well-established and informative tools in economic regulation to set reasonable revenue caps for energy network operators. However, regulatory benchmarking is not just another application of productivity analysis. Thi...

We investigate optimal rationing of resources and organizational slack when a principal procures from an agent with private information about fixed and variable costs. We study the problem in a two‐period setting with persistent types and investigate how the optimal rationing and slack depend on whether production increases or decreases over time....

An intuitively obvious approach to evaluating the effects of a new business model is to compare the performance of firms using the business model (the treatment group) with the performance of a similar group of firms that do not use the business model (the control group). Data Envelopment Analysis (DEA) can be a powerful tool in such comparisons be...

The implementation of an efficient and reliable case weighting system (CWS) is currently considered essential for running an efficient judiciary. However, traditional models for establishing case weights are time-consuming and expensive. Furthermore, since such case weights are often viewed as indications of the relative " importance " of different...

Non-parametric efficiency analysis, such as Data Envelopment Analysis (DEA) relies so far on endogenous local or exogenous general weights, based on revealed preferences or market prices. However, as DEA is gaining popularity in regulation and normative budgeting, the strategic interest of the evaluated industry calls for attention. We offer endoge...

This paper discusses methods for benchmarking vocational education and training colleges and presents results from a number of models. It is conceptually difficult to benchmark vocational colleges. The colleges typically offer a wide range of course programmes, and the students come from different socioeconomic backgrounds. We solve the comparabili...

This article addresses two important issues in public procurement: ex ante uncertainty about the participating agents’ qualities and costs and their strategic behaviour. We present a novel multi-dimensional auction that incentivises agents to make a partial inquiry into the procured task and to honestly report quality-cost probabilistic estimates b...

Benchmarking methods, and in particular Data Envelopment Analysis (DEA), have become well-established and informative tools for economic regulation. DEA is now routinely used by European regulators to set reasonable revenue caps for energy transmission and distribution system operators. The application of bench-marking in regulation, however, requi...

The European efficiency benchmarking for gas transmission system operators (E2GAS) is an initiative by a group of national regulatory authorities (NRAs) in the Council of European Energy Regulators (CEER). The project is the largest regulatory efficiency benchmarking so far in gas transmission, delivering reliable cost-efficiency estimates and esta...

This paper deals with empirical computation of Aumann–Shapley cost shares for joint production. We show that if one uses a mathematical programing approach with its non-parametric estimation of the cost function there may be observations in the data set for which we have multiple Aumann–Shapley prices. We suggest to overcome such problems by using...

Supply chains need specific investments for improved performance in terms of lead-time, cost, and quality. We study the contractual choice of a coordinator to either centralize or delegate the investment decision in a three-stage chain. The analysis derives closed-form results for the economic performance of three decentralized contracting schemes...

This paper shows that the use of excessively aggregated organizational units in a benchmarking study may skew the evaluation. The most aggregated or consolidated units receive excessively harsh evaluations. The paper also proposes a method for compensating the possible consolidation bias by calculating the so-called Potential Process Efficiency PPE...

Focusing in particular on upper secondary education, this paper examines whether the relatively high level of expenditure on education in the Nordic countries is matched by high output from the educational sector, both in terms of student enrolment and indicators of output quality in the form of graduation/completion rates and expected earnings aft...

Interactive Benchmarking IB® is an interactive software that organizes and analyzes data with the objective of improving performance. It combines state-of-the-art benchmarking theory, and decision support methods to identify appropriate role models and useful performance standards.

Merger analysis is usually drawing on concepts derived from competitive horizontal markets, such as market concentration, predatory foreclosure and economies of scale in marketing. In evaluating horizontal mergers among energy network operators, regulators must use different tools to evaluate the attractiveness of mergers. Norway is one country hav...

This study paper discusses methods whereby Danish vocational education and training colleges can be benchmarked, and presents results from a number of models. It is conceptually complicated to benchmark vocational colleges, as the various colleges in Denmark offer a wide range of course programmes. This makes it difficult to compare the resources u...

This report presents a feasibility analysis for a potential pan-European benchmark of gas transmission system operators on behalf of the Council of European Energy Regulators (CEER). The study goes through the steps of activity analysis to determine a feasible scope, then addresses the necessary data collection, including an approach for addressing...

Denmark, Norway, New Zealand, Canada and the USA are the OECD countries that spend most on education, measured in relation to GDP. Focusing in particular on upper secondary education, this paper examines whether the heavy expenditure on education in Denmark is matched by high output from the educational sector, both in terms of a large number of st...

The potential gains from a, regulatory change allowing for reallocation of marketable nitrogen emission permits under a cap and trade system are analyzed in a dynamic context using Data Envelopment Analysis to formulate linear programming models. In these models new, more environmental friendly farms are gradually introduced to the industry over 10...

Electricity transmission system operators (TSO) in Europe are increasing subject to high-powered performance-based regulation, such as revenue-cap regimes. The determination of the parameters in such regimes is challenging for national regulatory authorities (NRA), since there is normally a single TSO operating in each jurisdiction. The solution fo...

In this paper we use simulations to numerically evaluate the Hybrid DEA – Second Score Auction. In a procurement setting, the winner of the Hybrid auction by design receives payment at the most equal to the Second Score auction. It is therefore superior to the traditional Second Score scheme from the point of view of a principal interested in acqui...

In this paper we consider staffing decisions in branches of a large Canadian bank. The bank has well-developed staffing models and the branches work in a highly competitive environment. One would therefore expect limited ‘inefficiency’ in the sense of wasted resources and over-staffing. Using Data Envelopment Analysis (DEA) we nevertheless find con...

This paper discusses the design of a novel multi-dimensional mechanism which allows a principal to procure a single project or an item from multiple suppliers through a two-step payment. The suppliers are capable of producing different qualities at costs which cannot exceed a certain value and the mechanism balances between the costs faced by the s...

This chapter gives a overview of the questions and methods covered in this book. What is the idea of efficiency analyses and benchmarking?Why do we benchmark? What are the state–of–the–art methods that we shall discuss in this book? The chapter is mainly conceptual and can be read with a minimum of technical skills. The idea is to get an elementary...

One of the most interesting applications of benchmarking is to facilitate incentive provision. The design of incentive schemes is very important in firms, organizations and societies. It does not suffice to develop a perfectly coordinated plan. The agents involved in the plan must also have incentives to implement it.

The quantitative literature on productivity has focused mainly on the efficiency of individual firms and organizations. This research has demonstrated how much can be gained via individual improvements, by learning best practices and by designing appropriate incentive schemes at the firm level.

State-of-the-art benchmarking methods are a combination of two research traditions. One has its origins in management science, mathematical programming and operations research. We refer to this class of approaches as data envelopment analysis (DEA) models. The other research tradition has a more economics and econometrics oriented background and is...

Modern benchmarking is model based. It builds on comprehensive multiple-input, multiple-output relations estimated from actual practices. The level of complexity that benchmarking models can capture vastly exceeds those of mental models and textbook examples. A benchmark model allows us to make substantiated evaluations of the past performances of...

In Chap. 1, we introduced efficiency as the use of the least inputs (resources) to produce the most outputs (services). This concept is fundamental to much of modern benchmarking literature as it allows us to evaluate performance without clearly defined preferences. That is, we avoid the difficult task of estimating preference functions and determi...

In Chap.1, we introduced the idea of a systemic model of the firm that captures how multiple inputs are transformed into multiple outputs under the influence of multiple non-controllable, contextual factors. We also introduced the concept of a production set or a technology as a way to characterize the production possibilities in a given applicatio...

This report contains a methodological framework describing an economically sound process for model specification and choice of econometric models for static and dynamic efficiency for distribution system operators (DSO) in Belgium. Principally, the objectives for this report are twofold. First, it describes and motivates a systematic model specific...

The quantitative literature on productivity has focused mainly on measuring the efficiency of individual firms and organizations. The results demonstrate how much can be gained by individual improvements, by learning best practices and by designing appropriate incentive schemes at the firm level.

As explained in Chap. 1, there are two dominant approaches to modern benchmarking. One is the non-parametric, deterministic DEA approach discussed in some detail in the last three chapters; other is the stochastic frontier analysis (SFA), which we will cover in this and the next chapter. In the subsequent chapters, we will discuss a series of major...

In Chap. 1, we briefly introduced the concept of a production set or a technology as a way to characterize the production possibilities in a given application. This concept is crucial in advanced benchmarking because it defines the set of possible performance outcomes against which we can evaluate the actual performance of a given firm.

One of the more prominent applications of state-of-the-art benchmarking is in the regulation of natural monopolies in general and electricity and gas networks, in particular. Benchmarking studies applied to inform such regulation has considerable economic impact on firms and consumers alike.

This paper provides a new and systematic characterization of 488 universities, from 11 European countries: Finland, France, Germany, Hungary, Italy, Netherlands, Norway, Portugal, Spain, Switzerland and UK. Using micro indicators built on the integrated Aquameth database, we characterize the European university landscape according to the following...

The first Danish exchange for sugar beet contracts was established in January 2008. It was also the world’s first major application of a new technology, secure multiparty computation (SMC), which ensures the security and cost-effectiveness of such exchanges. The technology can potentially be used in a number of other applications, including voting,...

1. Introduction to Benchmarking.- 2. Efficiency Measures.- 3. Production Models and Technology.- 4. Data Envelopment Analysis DEA.- 5. Additional Topics in DEA.- 6. Statistical Analysis in DEA.- 7. Stochastic Frontier Analysis SFA.- 8. Additional Topics in SFA.- 9. Merger Analysis.- 10. Regulation and Contracting.- Appendix. Getting Started with R:...

In Chap. 1, we introduced efficiency as the use of the fewest inputs (resources) to produce the most outputs (services). This idea is fundamental to much of modern benchmarking literature because it allows us to evaluate performance without clearly defined preferences. That is, we avoid the difficult task of estimating preference functions and deci...

In this chapter, we continue our coverage of Stochastic Frontier Analysis (SFA).We extend the use of SFA to the estimation of general multi-input, multi-output productions functions and show how to estimate cost functions rather than the production functions that we focused on in Chap. 7. We also discuss hypothesis testing within an SFA framework.W...

DEA is often classified as a non-statistical or deterministic approach that does not easily allow genuine hypothesis testing. Although DEA has not historically emphasized the use of traditional statistical tests, considerable progress has been made in this respect over the last 15 years. We will cover some important results in this chapter.

In this article, we address a series of interrelated issues in the managerial challenge of public service contracting. This is done by prompting ten issues within four objectives and highlighting their relevance and potential interrelatedness in effective contract management. In contrast to prevalent piecemeal and theoretically one-dimensional appr...

The Danish hospital sector faces a major rebuilding program to centralize activity in fewer and larger hospitals. We aim to conduct an efficiency analysis of hospitals and to estimate the potential cost savings from the planned hospital mergers. We use Data Envelopment Analysis (DEA) to estimate a cost frontier. Based on this analysis, we calculate...

We covered the basics of DEA in the previous chapter. In this chapter, we will cover some additional topics that we find particularly relevant both to applications and to our understanding of DEA.

Climate change policy, in particular in Europe, will a¤ect the energy sector through the exposure to massive penetration of distributed energy resources or decentralized generation into electricity distribution and transmission grids. As the prerequisites for infrastructure regulation still prevail in the future, the question arises whether the cur...

Regulators for electricity network infrastructure, such as electricity distribution system operations (DSOs) face some particular challenges in the Nordic countries. Due to institutional, economic, and historical reasons the DSOs in the Nordic area are relatively numerous and heterogeneous in terms of ownership structure, size, and operating condit...

We investigate capital investment problems when a manager knows the costs of a set of available projects, while the owner only holds probabilistic beliefs about these costs. With mutually exclusive projects, an optimal policy can be defined by a series of cost targets, one for each of the possible projects. The project with the lowest reported cost...

Non-parametric efficiency analysis, such as Data Envelopment Analysis (DEA) relies so far on endogenous local or exogenous general weights, based on revealed preferences or market prices. However, as DEA is gaining popularity in regulation and normative budgeting, the strategic interest of the evaluated industry calls for attention. We offer endoge...

Network DEA provides a flexible way to customize DEA problems to specific applications. It provides 'links' across DMU's, or alternatively allows us to look inside a complex DMU with multiple nodes. In this short paper, we provide an illustration of a dynamic network DEA model. It is a network in the sense that it links the behavior of DMU's across...