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Improving envelopment in Data Envelopment Analysis under variable returns to scale

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  • Thanassoulis, Emmanuel
  • Kortelainen, Mika
  • Allen, Rachel

Abstract

In a Data Envelopment Analysis model, some of the weights used to compute the efficiency of a unit can have zero or negligible value despite of the importance of the corresponding input or output. This paper offers an approach to preventing inputs and outputs from being ignored in the DEA assessment under the multiple input and output VRS environment, building on an approach introduced in Allen and Thanassoulis (2004) for single input multiple output CRS cases. The proposed method is based on the idea of introducing unobserved DMUs created by adjusting input and output levels of certain observed relatively efficient DMUs, in a manner which reflects a combination of technical information and the decision maker’s value judgements. In contrast to many alternative techniques used to constrain weights and/or improve envelopment in DEA, this approach allows one to impose local information on production trade-offs, which are in line with the general VRS technology. The suggested procedure is illustrated using real data.

Suggested Citation

  • Thanassoulis, Emmanuel & Kortelainen, Mika & Allen, Rachel, 2012. "Improving envelopment in Data Envelopment Analysis under variable returns to scale," European Journal of Operational Research, Elsevier, vol. 218(1), pages 175-185.
    • Handle: RePEc:eee:ejores:v:218:y:2012:i:1:p:175-185
    DOI: 10.1016/j.ejor.2011.10.009
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    4. Vladimir E. Krivonozhko & Finn R. Førsund & Andrey V. Lychev, 2017. "On comparison of different sets of units used for improving the frontier in DEA models," Annals of Operations Research, Springer, vol. 250(1), pages 5-20, March.
    5. Soares de Mello, João Carlos C.B. & Angulo Meza, Lidia & da Silveira, Juliana Quintanilha & Gomes, Eliane Gonçalves, 2013. "About negative efficiencies in Cross Evaluation BCC input oriented models," European Journal of Operational Research, Elsevier, vol. 229(3), pages 732-737.
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    7. Førsund, Finn & Krivonozhko, Vladimir W & Lychev, Andrey V., 2016. "Smoothing the frontier in the DEA models," Memorandum 11/2016, Oslo University, Department of Economics.
    8. Krivonozhko, Vladimir E. & Førsund, Finn R. & Lychev, Andrey V., 2012. "Identifying Suspicious Efficient Units in DEA Models," Memorandum 30/2012, Oslo University, Department of Economics.
    9. Dariush Akbarian & Ali Akbar Bani & Mohsen Rostamy-Malkhalifeh & Farhad Hosseinzadeh Lotfi, 2022. "An algorithm for the anchor points of the PPS of the BCC model," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-14, December.
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