Quadratic data envelopment analysis

Quadratic data envelopment analysis

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Article ID: iaor20032116
Country: United Kingdom
Volume: 53
Issue: 11
Start Page Number: 1204
End Page Number: 1214
Publication Date: Nov 2002
Journal: Journal of the Operational Research Society
Authors: ,
Abstract:

Data Envelopment Analysis (DEA) offers a piece-wise linear approximation of the production frontier. The approximation tends to be poor if the true frontier is not concave, e.g. in case of economies of scale or of specialisation. To improve the flexibility of the DEA frontier and to gain in empirical fit, we propose to extend DEA towards a more general piece-wise quadratic approximation, called Quadratic Data Envelopment Analysis (QDEA). We show that QDEA gives statistically consistent estimates for all production frontiers with bounded Hessian eigenvalues. Our Monte-Carlo simulations suggest that QDEA can substantially improve efficiency estimation in finite samples relative to standard DEA models.

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