We extend Free Disposable Hull (FDH) efficiency analysis towards the general directional distance function framework. The profit interpretation of directional distance functions is extended to the non-convex FDH technologies. In addition, we derive an efficient enumerative algorithm for computing distance measures in Free Disposable Hull (FDH) technologies, which applies to the entire (infinitely large) family of directional distance functions. A simple numerical example and an application to European commercial banks illustrate the algorithm.

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doi.org/10.1023/A:1011176325187, hdl.handle.net/1765/68837
ERIM Article Series (EAS)
Journal of Productivity Analysis
Erasmus Research Institute of Management

Cherchye, L, Kuosmanen, T, & Post, G.T. (2001). FDH Directional Distance Functions: With an Application to European Commercial Banks. Journal of Productivity Analysis, 15(3), 201–215. doi:10.1023/A:1011176325187