<p>Usually, assuming an unchanging input–output relationship, traditional DEA ignores changes in pricing. However, handloom enterprises often operate in volatile markets, where raw materials prices change significantly. Given these market imperfections, Tone's new DEA method was used to estimate the profit efficiency. Using primary data collected from 427 handloom entrepreneurs in Assam, the study estimates profit efficiency and investigates the elements causing variances in efficiency. Moreover, a sensitivity study was carried out to evaluate the reliability of the regression results. The results indicate that handloom firms achieve only 56% profit efficiency, suggesting an enormous potential for profit growth without raising production. The fractional regression results revealed that profit efficiency is significantly influenced by entrepreneur-specific elements, including experience, training, and social networks, as well as firm-specific elements, including modern technology adoption, ICT use, innovation, geographic location, GI trademark, and sales distribution. Above all, however, the sensitivity analysis shows that interaction variables like innovation with location and innovation with experience exhibit the greatest effect on profit efficiency. The study also highlights how the use of modern technologies and ICT drives the profit efficiency gains. Based on this evidence, the study suggests some targeted policy implications, including promoting innovation in crucial areas where firms may optimize their advantages. It also suggests developing workshops aimed at experienced artists and entrepreneurs. These results offer policymakers and entrepreneurs important direction in developing evidence-based plans to raise the profit efficiency and long-term survival of the sector.</p>