Efficiency measurement with a non-convex free disposal hull technology

We investigate the basic monotonicity properties of least‐distance (in)efficiency measures on the class of non‐convex FDH (free disposable hull) technologies. We show that any known FDH least‐distance measure violates strong monotonicity over the strongly (Pareto‐Koopmans) efficient frontier. Taking this result into account, we develop a new class of FDH least‐distance measures that satisfy strong monotonicity and show that the developed (in)efficiency measurement framework has a natural profit interpretation.