Productivity Measurement and the Output of Retailing

It is easy to equate the output of a retail establishment with the value of its sales (e.g., revenue). The simplicity of this approach is clearly the reason that it is so often used. However, we have argued that to do this is conceptually inappropriate because it confuses output and demand two distinct phenomena (Achabal, Heineke, and Mcintyre 1984).Goodman (1985) once again asserts the, "value as output," point of view for retailers, and we feel that it is important to clarify several issues in light of his comments. With few exceptions, all points raised by Goodman fall in the same category; he would require that, "meaningful," measures of productivity be measures of the value of the product or service.We have divided this paper into two sections. The first section contains general comments on Goodman's discussion of output measures for retail establishments. The second section addresses appropriate methods for using market data to estimate retail production functions