Applied Optimization Estimating Output Specific Efficiencies

The likely audience for this book includes professional researchers, who want to enrich their tool set for applied efficiency analysis, as well as students of economics, management science or operations research, in­ tending to learn more about the potentials of rigorously understood efficiency analysis. This text presents a technique for comparative analysis of multi-output firms. In particular it provides a statistical foundation for output-specific efficiency estimation. In the presence of such differences the application of existing estimation techniques is either inappropriate or does not lead to statistically meaningful results. In this sense the book fills a remaining gap in the relevant literature. The key idea behind the approach is to use posterior distributions of target output-ratios of firms to determine reference points for performance comparison purposes. Monte Carlo simulations and an application to a real world data set indicate expectable small sample performance and the practical usefulness of the presented approach.