Integrating quality into the nonparametric analysis of efficiency: a simulation comparison of popular methods

Yauheniya Varabyova () and Jonas Schreyögg
Additional contact information
Yauheniya Varabyova: Universität Hamburg

Annals of Operations Research, 2018, vol. 261, issue 1, No 16, 365-392

Abstract: Abstract Measuring efficiency in service-producing industries is challenging, because output quality may have to be considered in addition to output quantity. Previous studies have relied on different nonparametric methods to model the relationship between efficiency and quality; however, limited work has been done so far to compare and integrate these methods. Our literature search identified the following popular methods: a one-stage approach, a congestion analysis, and a two-stage approach. The first two methods treat quality as an additional output (or input) of the production process, whereas the two-stage approach first estimates efficiency without considering quality and then regresses the efficiency estimates on quality in the second stage. In this study, we compare the performance of these three conventional methods to a fairly novel method, the so-called conditional approach, that can also be used to incorporate quality into the analysis of efficiency. We simulate data using eight data generating processes that reflect potential relationships between efficiency and quality in empirical settings. Our simulation exercise illustrates the dominance of the conditional approach over the conventional methods in terms of both predicting the true efficiency scores and capturing the original relationship between efficiency and quality. The conditional approach represents a powerful and flexible tool that can be used when the theoretical link between efficiency and quality is unclear.

Keywords: Simulation; Data envelopment analysis (DEA); Conditional efficiency estimator; Managerial efficiency (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s10479-017-2628-7 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:annopr:v:261:y:2018:i:1:d:10.1007_s10479-017-2628-7

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10479

DOI: 10.1007/s10479-017-2628-7

Access Statistics for this article

Annals of Operations Research is currently edited by Endre Boros

More articles in Annals of Operations Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().