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Event-specific data envelopment models and efficiency analysis

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Abstract:

Most, if not all, production technologies are stochastic. This article demonstrates how data envelopment analysis (DEA) methods can be adapted to accommodate stochastic elements in a state-contingent setting. Specifically, we show how observations on a random input, not under the control of the producer and not known at the time that variable input decisions are made, can be used to partition the state space in a fashion that permits DEA models to approximate an event-specific production technology. The approach proposed in this article uses observed data on random inputs and is easy to implement. After developing the event-specific DEA representation, we apply it to a data set for Western Australian barley production data. Our results highlight the need for acknowledging stochastic elements in efficiency analysis.

Keywords: DEA; efficiency; event-specific DEA; event-specific technology; risk; stochastic technology

Document Type: Research Article

DOI: http://dx.doi.org/10.1111/j.1467-8489.2010.00517.x

Publication date: January 1, 2011

bpl/ajar/2011/00000055/00000001/art00011
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