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A Maximum Decisional Efficiency Estimation Principle

Author

Listed:
  • Marvin D. Troutt

    (Department of Management, 211A Rehn Hall, Southern Illinois University at Carbondale, Carbondale, Illinois 62901-4627)

Abstract

This paper proposes a systematic approach to certain parameter estimation problems relevant to applied optimization models. A context-specific measure of decision maker performance called decisional efficiency is defined as a function of the unknown parameter vector. The values of this measure are considered to be distributed according to a performance density. Then a principle of Maximum Decisional Efficiency (MDE) is proposed and its relationship to the Maximum Likelihood principle of statistics is discussed. The principle is first illustrated on a problem of group ideal point estimation. Next, estimation of the ratio of ordering and holding costs in inventories managed by the EOQ model is considered. The results in both these examples are intuitively appealing, suggesting face validity of the principle. A more detailed illustration is developed for the problem of deriving a consensus scoring model for credit applicants which combines the data of more than one loan officer.

Suggested Citation

  • Marvin D. Troutt, 1995. "A Maximum Decisional Efficiency Estimation Principle," Management Science, INFORMS, vol. 41(1), pages 76-82, January.
    • Handle: RePEc:inm:ormnsc:v:41:y:1995:i:1:p:76-82
    DOI: 10.1287/mnsc.41.1.76
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    Citations

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    Cited by:

    1. Chen, Lu & Chen, Yuyi & Langevin, André, 2021. "An inverse optimization approach for a capacitated vehicle routing problem," European Journal of Operational Research, Elsevier, vol. 295(3), pages 1087-1098.
    2. Parag Pendharkar & Marvin Troutt, 2014. "Interactive classification using data envelopment analysis," Annals of Operations Research, Springer, vol. 214(1), pages 125-141, March.
    3. Adler, Nicole & Friedman, Lea & Sinuany-Stern, Zilla, 2002. "Review of ranking methods in the data envelopment analysis context," European Journal of Operational Research, Elsevier, vol. 140(2), pages 249-265, July.
    4. Marvin D. Troutt & Wan-Kai Pang & Shui-Hung Hou, 2006. "Behavioral Estimation of Mathematical Programming Objective Function Coefficients," Management Science, INFORMS, vol. 52(3), pages 422-434, March.
    5. Troutt, Marvin D. & Tadisina, Suresh K. & Sohn, Changsoo & Brandyberry, Alan A., 2005. "Linear programming system identification," European Journal of Operational Research, Elsevier, vol. 161(3), pages 663-672, March.
    6. Mesak, Hani I. & Bari, Abdullahel & Luehlfing, Michael S. & Han, Fei, 2015. "On modeling the advertising-operations interface under asymmetric competition," European Journal of Operational Research, Elsevier, vol. 240(1), pages 278-291.
    7. Mojtaba Ghiyasi & Jens Leth Hougaard, 2014. "Ranking Production Units According to Marginal Efficiency Contribution," MSAP Working Paper Series 04_2014, University of Copenhagen, Department of Food and Resource Economics.
    8. Kang, Hee Jay & Kim, Changhee & Choi, Kanghwa, 2024. "Combining bootstrap data envelopment analysis with social networks for rank discrimination and suitable potential benchmarks," European Journal of Operational Research, Elsevier, vol. 312(1), pages 283-297.
    9. Troutt, Marvin D. & Leung, T. W., 2003. "Enhanced bisection strategies for the Maximin Efficiency Ratio model," European Journal of Operational Research, Elsevier, vol. 144(3), pages 545-553, February.
    10. Troutt, M. D. & Pang, W. K. & Hou, S. H., 1999. "Performance of some boundary-seeking mode estimators on the dome bias model," European Journal of Operational Research, Elsevier, vol. 119(1), pages 209-218, November.
    11. Timothy C. Y. Chan & Taewoo Lee & Daria Terekhov, 2019. "Inverse Optimization: Closed-Form Solutions, Geometry, and Goodness of Fit," Management Science, INFORMS, vol. 65(3), pages 1115-1135, March.
    12. Troutt, Marvin D. & Ehie, Ike C. & Brandyberry, Alan A., 2007. "Maximally productive input-output units," European Journal of Operational Research, Elsevier, vol. 178(2), pages 359-373, April.
    13. C-P Bao & T-H Chen & S-Y Chang, 2008. "Slack-based ranking method: an interpretation to the cross-efficiency method in DEA," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(6), pages 860-862, June.
    14. Talluri, Srinivas, 2002. "A buyer-seller game model for selection and negotiation of purchasing bids," European Journal of Operational Research, Elsevier, vol. 143(1), pages 171-180, November.

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