what is x efficiency 
x efficiency refers to the degree of efficiency maintained by firms under conditions of imperfect competition efficiency in this context means a company getting the maximum outputs from its inputs including employee productivity and manufacturing efficiency in a highly competitive market firms are forced to be as efficient as possible to ensure strong profits and continued existence this is not true in situations of imperfect competition such as with a monopoly or duopoly understanding x efficiencyx efficiency points to irrational actions in the market by firms traditional neoclassical economics made the assumption that companies operated in rational ways meaning they maximized production at the lowest possible costs even when the markets were not efficient harvey leibenstein a harvard professor and economist challenged the belief that firms were always rational and called this anomaly x for unknown or x efficiency in the absence of real competition companies are more tolerant of inefficiencies in their operations the concept of x efficiency is used to estimate how much more efficient a company would be in a more competitive environment 1 born in the ukraine harvey leibenstein 1922 1994 was a professor at harvard university whose primary contribution other than x efficiency and its various applications to economic development property rights entrepreneurs and bureaucracy was the critical minimum effort theory that aimed to find a solution to breaking the poverty cycle in underdeveloped countries 