| Summary: | 碩士 === 東吳大學 === 經濟學系 === 92 === Abstract
To measure efficiency in literature, researchers usually start from estimating production function, cost function or profit function, and then to measure the gap between actual product, actual cost, actual profit and their maximum production, minimum cost and maximum profit. When estimating cost function or profit function, we usually assume goods markets and factor markets are perfectly competitive. The product prices and factor prices are determined by markets and are exogenous variables for firms. In real life, however, goods markets and factor markets might not be perfectly competitive.
In this paper we try to relax the assumption of perfect competition to find the decision rules for firms in the imperfect competition markets. We use prices as firm’s decision and conjectural variable.
In empirical model, we try to measure the gap between the price and marginal cost in goods market. We use the translog cost function of Input-model which was introduced by Atkinson and Cornwell (1994 a), (1994 b), (1998). The sample consists of twenty-two Taiwan domestic banks over the period 1983-2002. We estimate our model using Limdep 8.0.
In this paper we adopt two-stage methods to estimate efficiency. In the first stage translog cost function is estimated with firm-specific parameters to measure technical inefficiency. In the second stage, for firms of imperfect competition market to get the optimal level of output, we derive the first-order condition relating output price to marginal cost. The gap between price and marginal cost is considered as the scale inefficiency.
In this paper we get the following results：
1. In theory when a market is imperfectly competitive, firms maximize profits by decision rules of the price exceeding marginal cost in goods markets. The gap between price and marginal cost is considered as the scale inefficiency which is due to the imperfect structure of the industry or government regulations.
2. The most technically efficient bank is CHIAO TUNG BANK. The second is BANK OF KAOHSIUNG. The third is FARMER BANK. The least technically efficient bank is KAOHSIUNG BUSINESS BANK.
3. The industry of domestic banks in Taiwan is not a perfectly competitive industry.
4. For scale inefficiency, the local business banks have more market power in setting the price of loan and discount than the price of net investment.
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