The StoNED Age: The Departure Into a New Era of Efficiency Analysis? – A Monte Carlo Comparison of StoNED and the “Oldies” (SFA and DEA)
AbstractBased on the seminal paper of Farrell (1957), researchers have developed several methods for measuring efficiency. Nowadays, the most prominent representatives are nonparametric data envelopment analysis (DEA) and parametric stochastic frontier analysis (SFA), both introduced in the late 1970s. Researchers have been attempting to develop a method which combines the virtues – both nonparametric and stochastic – of these “oldies”. The recently introduced Stochastic non-smooth envelopment of data (StoNED) by Kuosmanen and Kortelainen (2010) is such a promising method. This paper compares the StoNED method with the two “oldies” DEA and SFA and extends the initial Monte Carlo simulation of Kuosmanen and Kortelainen (2010) in several directions. We show, among others, that, in scenarios without noise, the rivalry is still between the “oldies”, while in noisy scenarios, the nonparametric StoNED PL now constitutes a promising alternative to the SFA ML.
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Bibliographic InfoPaper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0394.
Length: 43 pages
Date of creation: Jan 2013
Date of revision:
Find related papers by JEL classification:
- C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
- D2 - Microeconomics - - Production and Organizations
- L5 - Industrial Organization - - Regulation and Industrial Policy
- Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-16 (All new papers)
- NEP-EFF-2013-03-16 (Efficiency & Productivity)
- NEP-ORE-2013-03-16 (Operations Research)
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