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Title:The StoNED age: The departure into a new era of efficiency analysis? An MC study comparing StoNED and the "oldies" (SFA and DEA) PDF Logo
Authors:Andor, Mark
Hesse, Frederik
Issue Date:2012
Series/Report no.:CAWM Discussion Paper, Centrum für Angewandte Wirtschaftsforschung Münster 60
Abstract:Based on the seminal paper of Farrell (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. Since decades, 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 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 two directions. Firstly, we consider a wider range of conditions. Secondly, we also consider the maximum likelihood estimator (ML) and the pseudolikelihood estimator (PL) for SFA and StoNED, respectively. We show 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.
Subjects:efficiency
stochastic non-smooth envelopment of data (StoNED)
data envelopment analysis (DEA)
stochastic frontier analysis (SFA)
monte carlo simulation
JEL:C1
C5
D2
L5
Q4
Document Type:Working Paper
Appears in Collections:CAWM Discussion Papers, Universität Münster

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