Simar and Wilson (J. Econometrics, 2007) provided a statistical model that can rationalize two-stage estimation of technical efficiency in nonparametric settings. Two-stage estimation has been widely used, but requires a strong assumption: the second-stage environmental variables cannot affect...

The issue of quality and its relationship with efficiency and performance is a crucial operational issue in many fields of study including production economics, operations research, engineering and business management. In this paper we provide a methodology for identifying latent quality...