Modelling weak disposability in data envelopment analysis under relaxed convexity assumptions

The treatment of undesirable (bad) outputs in models of efficiency and productivity analysis often requires replacing the assumption of free disposability of outputs by their weak disposability. In a recent publication the authors showed that the Kuosmanen technology is the only correct representation of the fully convex technology exhibiting weak disposability of bad and good outputs. In this paper we relax the assumption of full convexity and consider two further possibilities: the case in which only the output sets are assumed convex and the case in which no convexity is assumed at all. In the first case we show that, although the traditional Shephard technology of nonparametric production analysis satisfies the assumption of convex output sets, it is larger than necessary. Based on the minimum extrapolation principle, we develop a correct model that is based on the assumed axioms. The second case leads to the development of a weakly disposable analogue of the free disposable hull. To complete our study, we give a full axiomatic definition of the Shephard technology. (C) 2010 Elsevier B.V. All rights reserved.