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Allocative Efficiency

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Shyam Sunder – 1st expert on this subject based on the ideXlab platform

  • Allocative Efficiency of markets with zero intelligence traders market as a partial substitute for individual rationality
    Journal of Political Economy, 1993
    Co-Authors: Dhananjay K Gode, Shyam Sunder


    We report market experiments in which human traders are replaced by “zero-intelligence” programs that submit random bids and offers. Imposing a budget constraint (i.e., not permitting traders to sell below their costs or buy above their values) is sufficient to raise the Allocative Efficiency of these auctions close to 100 percent. Allocative Efficiency of a double auction derives largely from its structure, independent of traders’ motivation, intelligence, or learning. Adam Smith’s invisible hand may be more powerful than some may have thought; it can generate aggregate rationality not only from individual rationality but also from individual irrationality.

Thomas Reardon – 2nd expert on this subject based on the ideXlab platform

  • Allocative Efficiency of agrifood traders shrimp traders in indonesia
    Bulletin of Indonesian Economic Studies, 2015
    Co-Authors: Dale Yi, Thomas Reardon


    Shrimp is one of Indonesia’s most important agricultural export commodities, with an annual export value exceeding $1 billion. If this high-value sector is to remain competitive and continue to grow, rural traders must be able to efficiently allocate scarce labour and factor inputs to trade shrimp. This study tests for factors leading to Allocative inEfficiency in the shrimp trade, by estimating a stochastic cost frontier on the basis of data from a survey of 200 shrimp traders in Central Java and South Sulawesi. Our results show that larger firms have a distinct cost advantage in trade and, owing in part to greater access to factor markets, are more efficient in allocating factors. Small firms can improve their Allocative Efficiency and become more competitive by specialising in trading one shrimp variety and by using output contracts to mitigate risk in the output market.

  • Allocative Efficiency of Agrifood Traders: Shrimp Traders in Indonesia
    Bulletin of Indonesian Economic Studies, 2015
    Co-Authors: Dale Yi, Thomas Reardon


    This is the first study in the agrifood economics literature to test for Allocative Efficiency among traders. The study tests for factors leading to Allocative inEfficiency in shrimp trade by estimating a stochastic cost frontier using data from a survey of 200 shrimp traders in Indonesia. Results show that larger firms have a distinct cost-advantage in trade, and are also more efficient in allocating factors due in part to improved access to factor markets. Small firms can improve Allocative Efficiency to remain competitive if they are able to specialize in trading one shrimp variety, and use output contracts to mitigate risk in the output market. These results are important to Indonesia, where shrimp annual exports exceed 1 billion USD. The ability of rural traders to efficiently allocate scarce labor and factor inputs to trade shrimp is paramount for this high-value sector to remain competitive and continue to grow.

C O A Ugwumba – 3rd expert on this subject based on the ideXlab platform

  • Allocative Efficiency of Smallholder Cocoyam Farmers in South-South, Nigeria
    International Journal of Environment Agriculture and Biotechnology, 2016
    Co-Authors: G I Wilcox, C O A Ugwumba, A.i. Achike, C Agbagwaa, F B Uche


    The study examined the levels of Allocative Efficiency, socio-economic determinants of Allocative Efficiency and constraints to cocoyam production among smallholder farmers in South-South Nigeria. Multistage, purposive and random sampling techniques were used to select 200 cocoyam (100- Colocasia and 100- Xanthosoma spp.) farmers for the study. Primary data were collected using structured questionnaire administered by personal interview. Descriptive and Parametric statistics involving Cobb-Douglas stochastic frontier cost function was used for data analyses using the maximum likelihood method. Results of the analyses indicated that majority (69%) of the farmers were females; 78% attained some level of formal education and 45% operated between 0.1-0.6 hactares of land. The Colocasia and Xanthosoma spp. farmers showed varying levels of Allocative Efficiency with no farmer attaining 100%Allocative Efficiency level. The mean, minimum and maximum Efficiency levels for the two varieties were; 0.56, 0.31 and 0.86 and then 0.42, 0.22 and 0.82 respectively. The maximum likelihood estimates for the cost factors were positive and statistically significant for both varieties of cocoyam while the significant gamma (γ) values of 0.63 and 0.51 establishes the fact that inEfficiency exists among the sampled farmers. The determinants of Allocative Efficiency were farming experience, age and household size. Allocative Efficiency can be improved for cocoyam (Colocasia and Xanthosoma spp.) through cost savings of 39.5% and 73.4% for the efficient and inefficient farmers. The major constraints to cocoyam production in the area were scarcity of improved high yielding corms, lack of capital, high cost of labour, high cost of transportation, lack of storage facilities, diseases and pests. It is therefore recommended that farmers should cut down on some of the cost incurring variables like labour and corms for planting through optimizing the use of family labour and growing the corms needed for future planting season. Again, since the ages of cocoyam farmers and farming experience were very significant in the production of cocoyam, it is recommended that the extension agents organize seminars in the Local Government Areas and State levels were young and upcoming entrepreneurs can be trained and educated by the older farmers in order to exhibit higher levels of entrepreneurial capabilities and Efficiency leading to higher farm output.

  • Allocative Efficiency of egusi melon colocynthis citrullus lanatus production inputs in owerri west local government area of imo state nigeria
    Journal of Agricultural Sciences, 2010
    Co-Authors: C O A Ugwumba


    Investigating the Allocative Efficiency of ‘egusi’ melon production inputs in Owerri West Local Government Area of Imo State, Nigeria, this study utilized information generated from 60 respondents selected by multistage random sampling technique. Cross sectional primary data were obtained through the administration of questionnaire to the respondents and their memory recall. The articulated data were analyzed by means of non-parametric and parametric statistics. Farmers in the area still produce “egusi’ melon because of its socio-economic and cultural values such as income generation, local soup preparation and weed suppressant in mixed crop farms. Results of data analysis implicated household size, cost of inputs and farm size as significant determinants of production output. Production output was also positively influenced by land, labour (family and hired), fertilizer, capital and seed inputs, but significantly determined by land and fertilizer inputs. More so, computed Allocative Efficiency values showed that land (1.14), fertilizer (17.44) and seed (1.76) inputs were under utilized, while family labour (0.64), hired labour (0.08) and capital (0.83) inputs were over utilized. The serious problems of melon production were lack of land, high cost of inputs and inadequate processing facilities. Government should subsidize cost of inputs especially fertilizers and provide cheap credit facilities in order to facilitate increase in productivity and sustainability of ‘egusi’ melon production in the area. © Kamla-Raj 2010