This paper examines the impact of an endogenous cost function variable on the inefficiency estimates generated by stochastic frontier analysis (SFA). The specific variable of interest in this application is endogenous quality in nursing homes. We simulate a dataset based on the characteristics...

This paper makes two important contributions to the literature on prediction intervals for firm specific inefficiency estimates in cross sectional SFA models. Firstly, the existing intervals in the literature do not correspond to the minimum width intervals and in this paper we discuss how to...