Chance-constrained cost efficiency in data envelopment analysis model with random inputs and outputs

Date

2018-02-20

Advisors

Journal Title

Journal ISSN

ISSN

1109-2858

Volume Title

Publisher

Springer

Type

Article

Peer reviewed

Yes

Abstract

Data envelopment analysis (DEA) is a well-known non-parametric technique primarily used to estimate radial efficiency under a set of mild assumptions regarding the production possibility set and the production function. The technical efficiency measure can be complemented with a consistent radial metrics for cost, revenue and profit efficiency in DEA, but only for the setting with known input and output prices. In many real applications of performance measurement, such as the evaluation of utilities, banks and supply chain operations, the input and/or output data are often stochastic and linked to exogenous random variables. It is known from standard results in stochastic programming that rankings of stochastic functions are biased if expected values are used for key parameters. In this paper, we propose economic efficiency measures for stochastic data with known input and output prices. We transform the stochastic economic efficiency models into a deterministic equivalent non-linear form that can be simplified to a deterministic programming with quadratic constraints. An application for a cost minimizing planning problem of a state government in the US is presented to illustrate the applicability of the proposed framework.

Description

The file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link

Keywords

Data envelopment analysis, Weight restrictions, Random input–output, Cost efficiency, Quadratic programming

Citation

Shiraz, R.K., Hatami-Marbini, A., Emrouznejad, A. and Fukuyama, H. (2018) Chance-constrained cost efficiency in data envelopment analysis model with random inputs and outputs, Operational Research an International Journal,

Rights

Research Institute