The StoNED age: The Departure Into a New Era of Efficiency Analysis? A MC Study Comparing StoNED and the "Oldies" (SFA and DEA)

Mark Andor and Frederik Hesse

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: Based on the seminal paper of Farrell (1957), researchers have developed several methods for measuring e fficiency. 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.

JEL-codes: C14 D24 L51 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-eff and nep-ore
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: The StoNED age: The departure into a new era of efficiency analysis? An MC study comparing StoNED and the "oldies" (SFA and DEA) (2012)
Working Paper: The StoNED age: The Departure Into a New Era of Efficiency Analysis? An MC study Comparing StoNED and the "Oldies" (SFA and DEA)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79849

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