Measuring dynamic efficiency under risk aversion

Problems of measuring the efficiency of decision-making units are discussed here in an intertemporal framework, where both current and capital inputs are used to product outputs. It is assumed that the units are risk averse and they attempt to adjust their short run input decisions so as to attain the intertemporally optimal expansion paths. By using an adjustment cost approach the influence of risk aversion and output fluctuations on the dynamic production frontier are analyzed by a set of optimal control models.