Nonparametric efficiency analysis under price uncertainty: A first-order stochastic dominance approach

Timo Kuosmanen, Thierry Post

Research output: Contribution to journalArticle

12 Citations (Scopus)

Abstract

This paper extends the nonparametric approach to efficiency analysis to deal with uncertainty of input-output prices. We generalize the notion of economic efficiency to derive necessary and sufficient first-order stochastic dominance (FSD) efficiency conditions. Interestingly, the FSD conditions include as limiting cases the traditional conditions for economic efficiency and technical efficiency. Furthermore, we propose empirical tests for these FSD conditions, which require minimal assumptions concerning the preferences of the decision-maker and the statistical distribution of the prices. From operational point of view, the FSD conditions can be tested empirically using standard mathematical programming techniques. An empirical application to the Dutch electricity distribution sector illustrates the approach.

Original languageEnglish
Pages (from-to)183-200
Number of pages18
JournalJournal of Productivity Analysis
Volume17
Issue number3
DOIs
Publication statusPublished - 2002
Externally publishedYes

Fingerprint

efficiency analysis
uncertainty
economic efficiency
efficiency
electricity
decision maker
programming
Efficiency analysis
Stochastic dominance
Price uncertainty
Economic efficiency

Keywords

  • Data envelopment analysis
  • Electricity distribution sector
  • Nonparametric efficiency analysis
  • Performance evaluation under uncertainty
  • Stochastic dominance

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Social Sciences (miscellaneous)

Cite this

Nonparametric efficiency analysis under price uncertainty : A first-order stochastic dominance approach. / Kuosmanen, Timo; Post, Thierry.

In: Journal of Productivity Analysis, Vol. 17, No. 3, 2002, p. 183-200.

Research output: Contribution to journalArticle

@article{473d9a6ad858411ea54121c01a2c41e3,
title = "Nonparametric efficiency analysis under price uncertainty: A first-order stochastic dominance approach",
abstract = "This paper extends the nonparametric approach to efficiency analysis to deal with uncertainty of input-output prices. We generalize the notion of economic efficiency to derive necessary and sufficient first-order stochastic dominance (FSD) efficiency conditions. Interestingly, the FSD conditions include as limiting cases the traditional conditions for economic efficiency and technical efficiency. Furthermore, we propose empirical tests for these FSD conditions, which require minimal assumptions concerning the preferences of the decision-maker and the statistical distribution of the prices. From operational point of view, the FSD conditions can be tested empirically using standard mathematical programming techniques. An empirical application to the Dutch electricity distribution sector illustrates the approach.",
keywords = "Data envelopment analysis, Electricity distribution sector, Nonparametric efficiency analysis, Performance evaluation under uncertainty, Stochastic dominance",
author = "Timo Kuosmanen and Thierry Post",
year = "2002",
doi = "10.1023/A:1015037719942",
language = "English",
volume = "17",
pages = "183--200",
journal = "Journal of Productivity Analysis",
issn = "0895-562X",
publisher = "Springer Netherlands",
number = "3",

}

TY - JOUR

T1 - Nonparametric efficiency analysis under price uncertainty

T2 - A first-order stochastic dominance approach

AU - Kuosmanen, Timo

AU - Post, Thierry

PY - 2002

Y1 - 2002

N2 - This paper extends the nonparametric approach to efficiency analysis to deal with uncertainty of input-output prices. We generalize the notion of economic efficiency to derive necessary and sufficient first-order stochastic dominance (FSD) efficiency conditions. Interestingly, the FSD conditions include as limiting cases the traditional conditions for economic efficiency and technical efficiency. Furthermore, we propose empirical tests for these FSD conditions, which require minimal assumptions concerning the preferences of the decision-maker and the statistical distribution of the prices. From operational point of view, the FSD conditions can be tested empirically using standard mathematical programming techniques. An empirical application to the Dutch electricity distribution sector illustrates the approach.

AB - This paper extends the nonparametric approach to efficiency analysis to deal with uncertainty of input-output prices. We generalize the notion of economic efficiency to derive necessary and sufficient first-order stochastic dominance (FSD) efficiency conditions. Interestingly, the FSD conditions include as limiting cases the traditional conditions for economic efficiency and technical efficiency. Furthermore, we propose empirical tests for these FSD conditions, which require minimal assumptions concerning the preferences of the decision-maker and the statistical distribution of the prices. From operational point of view, the FSD conditions can be tested empirically using standard mathematical programming techniques. An empirical application to the Dutch electricity distribution sector illustrates the approach.

KW - Data envelopment analysis

KW - Electricity distribution sector

KW - Nonparametric efficiency analysis

KW - Performance evaluation under uncertainty

KW - Stochastic dominance

UR - http://www.scopus.com/inward/record.url?scp=0036286051&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=0036286051&partnerID=8YFLogxK

U2 - 10.1023/A:1015037719942

DO - 10.1023/A:1015037719942

M3 - Article

VL - 17

SP - 183

EP - 200

JO - Journal of Productivity Analysis

JF - Journal of Productivity Analysis

SN - 0895-562X

IS - 3

ER -