Skip to main content

Research Repository

Advanced Search

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.

Using the latent class approach to cluster firms in benchmarking: An application to the US electricity transmission industry Thumbnail


Authors

M. Llorca

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.
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

Files





You might also like



Downloadable Citations