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How to Improve the Performances of DEA/FDH Estimators in the Presence of Noise?

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  • Simar, Léopold

Abstract

In frontier analysis, most of the nonparametric approaches (DEA, FDH) are based on envelopment ideas which suppose that with probability one, all the observed units belong to the attainable set. In these "deterministic" frontier models, statistical theory is now mostly available. In the presence of noise, this is no more true and envelopment estimators could behave dramatically since they are very sensitive to extreme observations that could result only from noise. DEA/FDH techniques would provide estimators with an error of the order of the standard deviation of the noise. In this paper we propose to adapt some recent results on detecting change points, to improve the performances of the classical DEA/FDH estimators in the presence of noise. We show by simulated examples that the procedure works well when the noise is of moderate size, in term of noise to signal ratio. It turns out that the procedure is also robust to outliers.

Suggested Citation

  • Simar, Léopold, 2003. "How to Improve the Performances of DEA/FDH Estimators in the Presence of Noise?," SFB 373 Discussion Papers 2003,33, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  • Handle: RePEc:zbw:sfb373:200333
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Wolfgang Härdle & Seok-Oh Jeong, 2005. "Nonparametric Productivity Analysis," SFB 649 Discussion Papers SFB649DP2005-013, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    2. Léopold Simar & Valentin Zelenyuk, 2011. "Stochastic FDH/DEA estimators for frontier analysis," Journal of Productivity Analysis, Springer, vol. 36(1), pages 1-20, August.
    3. Florens, Jean-Pierre & Schwarz, Maik & Van Bellegem, Sébastien, 2010. "Nonparametric Frontier Estimation from Noisy Data," TSE Working Papers 10-179, Toulouse School of Economics (TSE).
    4. Ortega Irizo, Fco. Javier & Basulto Santos, Jesús, 2009. "Estimación Bayesiana en modelos de producción con frontera determinista/Bayesian Estimation in Deterministic Frontier Production Models," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 27, pages 573(22á)-57, Agosto.
    5. Marijn Verschelde & Michel Dumont & Glenn Rayp & Bruno Merlevede, 2016. "Semiparametric stochastic metafrontier efficiency of European manufacturing firms," Journal of Productivity Analysis, Springer, vol. 45(1), pages 53-69, February.
    6. repec:eee:ejores:v:262:y:2017:i:2:p:792-801 is not listed on IDEAS
    7. Chand, Narendra & Kerr, Geoffrey N. & Bigsby, Hugh R., "undated". "Why some community forests are performing better than others: a case of forest user groups in Nepal," 2010 Conference, August 26-27, 2010, Nelson, New Zealand 96827, New Zealand Agricultural and Resource Economics Society.
    8. Filippou, Miltiades & Zervopoulos, Panagiotis, 2011. "Developing a hybrid comparative optimization model for short-term forecasting: an ‘idle time interval’ roadmap for operational units’ strategic planning," MPRA Paper 41573, University Library of Munich, Germany.
    9. Prakashan Veettil & Stijn Speelman & Guido Huylenbroeck, 2013. "Estimating the Impact of Water Pricing on Water Use Efficiency in Semi-arid Cropping System: An Application of Probabilistically Constrained Nonparametric Efficiency Analysis," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(1), pages 55-73, January.
    10. Zervopoulos, Panagiotis, 2012. "Dealing with small samples and dimensionality issues in data envelopment analysis," MPRA Paper 39226, University Library of Munich, Germany.
    11. Kneip, Alois & Simar, Léopold & Van Keilegom, Ingrid, 2015. "Frontier estimation in the presence of measurement error with unknown variance," Journal of Econometrics, Elsevier, vol. 184(2), pages 379-393.
    12. Amin W. Mugera, 2013. "Measuring technical efficiency of dairy farms with imprecise data: a fuzzy data envelopment analysis approach," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(4), pages 501-520, October.
    13. repec:spr:annopr:v:253:y:2017:i:1:d:10.1007_s10479-016-2382-2 is not listed on IDEAS
    14. Vitaliy Zheka, 2006. "Corporate Governance and Firm Performance in Ukraine," CERT Discussion Papers 0605, Centre for Economic Reform and Transformation, Heriot Watt University.
    15. Udhayakumar, A. & Charles, V. & Kumar, Mukesh, 2011. "Stochastic simulation based genetic algorithm for chance constrained data envelopment analysis problems," Omega, Elsevier, vol. 39(4), pages 387-397, August.
    16. Badin, Luiza & Daraio, Cinzia & Simar, Léopold, 2010. "Optimal bandwidth selection for conditional efficiency measures: A data-driven approach," European Journal of Operational Research, Elsevier, vol. 201(2), pages 633-640, March.
    17. Uwe Cantner & Jens J. Krüger & René Söllner, 2012. "Product quality, product price, and share dynamics in the German compact car market," Industrial and Corporate Change, Oxford University Press, vol. 21(5), pages 1085-1115, October.
    18. Yuen, Andrew Chi-lok & Zhang, Anming & Cheung, Waiman, 2013. "Foreign participation and competition: A way to improve the container port efficiency in China?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 49(C), pages 220-231.
    19. Chand, Narendra & Kerr, Geoffrey N. & Bigsby, Hugh, 2015. "Production efficiency of community forest management in Nepal," Forest Policy and Economics, Elsevier, vol. 50(C), pages 172-179.
    20. Dongwei Su & Xingxing He, 2012. "Ownership structure, corporate governance and productive efficiency in China," Journal of Productivity Analysis, Springer, vol. 38(3), pages 303-318, December.
    21. Olesen, Ole B. & Petersen, Niels Christian, 2016. "Stochastic Data Envelopment Analysis—A review," European Journal of Operational Research, Elsevier, vol. 251(1), pages 2-21.
    22. Anne-Kathrin Last & Heike Wetzel, 2009. "Effizienzmessverfahren – eine Einführung," Working Paper Series in Economics 145, University of Lüneburg, Institute of Economics.
    23. repec:eee:ejores:v:266:y:2018:i:2:p:746-760 is not listed on IDEAS
    24. Francisco J. Ortega & Jose M. Gavilan, 2016. "Bayesian estimation of the half-normal regression model with deterministic frontier," Computational Statistics, Springer, vol. 31(3), pages 1059-1078, September.
    25. Timo Kuosmanen & Mika Kortelainen, 2012. "Stochastic non-smooth envelopment of data: semi-parametric frontier estimation subject to shape constraints," Journal of Productivity Analysis, Springer, vol. 38(1), pages 11-28, August.

    More about this item

    Keywords

    Nonparametric frontier; Stochastic DEA/FDH; Robustness to outliers;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D20 - Microeconomics - - Production and Organizations - - - General

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