ON THE TECHNICALLY EFFICIENT ORGANIZATION OF AN INDUSTRY - A STUDY OFUS AIRLINES

In nonparametric analysis of production efficiency, the focus of atten tion is typically on the individual firm. In this article, we evaluate efficiency in resource utilization at the industry level. We propose an integer programming model to measure the extent of input saving pos sible if the observed output level of the industry is allocated to an optimal number of identical firms. This approach is applied to data fo r U.S. airlines covering the period 1970-84. Our results confirm that there were too few airlines prior to deregulation and suggest that the re were too many firms during the early years of the post-deregulation era.