M. Llorca
Using the latent class approach to cluster firms in benchmarking: An application to the US electricity transmission industry
Llorca, M.; Orea, L.; Pollitt, M.G.
Authors
L. Orea
M.G. Pollitt
Abstract
In this paper we advocate using the latent class model (LCM) approach to control for technological differences in traditional efficiency analysis of regulated electricity networks. Our proposal relies on the fact that latent class models are designed to cluster firms by uncovering differences in technology parameters. Moreover, it can be viewed as a supervised method for clustering data that takes into account the same (production or cost) relationship that is analysed later, often using nonparametric frontier techniques. The simulation exercises show that the proposed approach outperforms other sample selection procedures. The proposed methodology is illustrated with an application to a sample of US electricity transmission firms for the period 2001–2009.
Citation
Llorca, M., Orea, L., & Pollitt, M. (2014). Using the latent class approach to cluster firms in benchmarking: An application to the US electricity transmission industry. Operations research perspectives, 1(1), 6-17. https://doi.org/10.1016/j.orp.2014.03.002
Journal Article Type | Article |
---|---|
Acceptance Date | Mar 18, 2014 |
Online Publication Date | Apr 23, 2014 |
Publication Date | Mar 1, 2014 |
Deposit Date | May 18, 2015 |
Publicly Available Date | May 26, 2015 |
Journal | Operations research perspectives. |
Electronic ISSN | 2214-7160 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 1 |
Issue | 1 |
Pages | 6-17 |
DOI | https://doi.org/10.1016/j.orp.2014.03.002 |
Keywords | Electricity transmission, Utilities regulation, Latent class model approach, Nonparametric analysis. |
Public URL | https://durham-repository.worktribe.com/output/1428540 |
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http://creativecommons.org/licenses/by-nc-nd/4.0/
Copyright Statement
© 2014 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/3.0/).
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