ROBUST DECISIONS IN ECONOMIC-MODELS

The minimax principle and a semiparametric characterization of the random states of nature are utilized here in the models of efficiency measurement by data envelopment analysis. These methods assume inadequate knowledge of the decision-maker about the random states of nature and develop a cautious optimal policy by testing if the chosen strategy or solution is very sensitive to the worst contingency that may arise. Some empirical applications to educational production functions show the usefulness of these operational methods.