Stochastic efficiency analysis with a reliability consideration

Stochastic Data Envelopment Analysis (DEA) models have been introduced in the literature to assess the performance of operating entities with random input and output data. A stochastic DEA model with a reliability constraint is proposed in this study that maximizes the lower bound of an entity׳s efficiency score with some pre-selected probability. We define the concept of stochastic efficiency and develop a solution procedure. The economic interpretations of the stochastic efficiency index are presented when the inputs and outputs of each entity follow a multivariate joint normal distribution.