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The StoNED age: the departure into a new era of efficiency analysis? A monte carlo comparison of StoNED and the “oldies” (SFA and DEA)

Mark Andor and Frederik Hesse

Journal of Productivity Analysis, 2014, vol. 41, issue 1, 85-109

Abstract: Based on the seminal paper of Farrell (J R Stat Soc Ser A (General) 120(3):253–290, 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 (J Prod Anal 38(1):11–28, 2012 ) 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 (J Prod Anal 38(1):11–28, 2012 ) 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. Copyright Springer Science+Business Media New York 2014

Keywords: Efficiency; Stochastic non-smooth envelopment of data (StoNED); Data envelopment analysis (DEA); Stochastic frontier analysis (SFA); Monte carlo simulation; C14; C52; D24; L59 (search for similar items in EconPapers)
Date: 2014
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Working Paper: The StoNED Age: The Departure Into a New Era of Efficiency Analysis? – A Monte Carlo Comparison of StoNED and the "Oldies" (SFA and DEA) (2013) Downloads
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