Chance constrained data envelopment analysis for efficiency analysis: An application to Turkish manufacture of iron and steel sector

Abstract

This study aims to determine the technical efficiency levels of the enterprises active in the “Manufacture of Basic Iron and Steel and of Ferro-Alloys” sector in Turkey. The inputs and outputs are deterministic in classical Data Envelopment Analysis, so the changes in exchange rate, inflation rate, etc. aren’t considered, and the precautions for future inconsistencies are not foreseen. This leads to critics of deterministic Data Envelopment Analysis models. In this paper, the additive model developed depending on the Banker, Charnes and Cooper (BCC) model was extended by chance constrained programming formulations in order to overcome the insufficiencies in deterministic Data Envelopment Analysis, and the technical analysis of “Manufacture of Basic Iron and Steel and of Ferro-Alloys” sector was performed.