Estimating non-convex production sets - imposing convex input sets and output sets in data envelopment analysis

Abstract In this paper, we present Data Envelopment Analysis models for estimating non-convex production sets. In contrast to the Banker et al. (Banker, R.D., Charnes, A. and Cooper, W.W., 1984. Management Science 30 (9), 1078–1092) model, these models give statistically consistent estimators for production sets that are non-convex, but do have convex input sets and/or convex output sets, as is typically assumed in micro-economic theory. In addition, these models suffer less from a finite sample error than the Free Disposable Hull (Deprins, D., Simar, L., Tulkens, H., 1984. In: Marchand, M., Pestieu, P., Tulkens, H. (Eds.), The Performance of Public Enterprises. North-Holland, Amsterdam, pp. 243–267) model.