Chance Constrained Programming Formulations for Stochastic Characterizations of Efficiency and Dominance in DEA

William Cooper, Zhimin Huang, Vedran Lelas, Susan Li and Ole Olesen

Journal of Productivity Analysis, 1998, vol. 9, issue 1, 53-79

Abstract: Pareto-Koopmans efficiency in Data Envelopment Analysis (DEA) is extended to stochastic inputs and outputs via probabilistic input-output vector comparisons in a given empirical production (possibility) set. In contrast to other approaches which have used Chance Constrained Programming formulations in DEA, the emphasis here is on “joint chance constraints.” An assumption of arbitrary but known probability distributions leads to the P-Model of chance constrained programming. A necessary condition for a DMU to be stochastically efficient and a sufficient condition for a DMU to be non-stochastically efficient are provided. Deterministic equivalents using the zero order decision rules of chance constrained programming and multivariate normal distributions take the form of an extended version of the additive model of DEA. Contacts are also maintained with all of the other presently available deterministic DEA models in the form of easily identified extensions which can be used to formalize the treatment of efficiency when stochastic elements are present. Copyright Kluwer Academic Publishers 1998

Keywords: Stochastic DEA; Stochastic efficiency; Stochastic efficiency dominance; Almost 100 percent confidence chance constraints (search for similar items in EconPapers)
Date: 1998
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DOI: 10.1023/A:1018320430249

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