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Measuring the performances of decision-making units using geometric average efficiency

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Listed:
  • Y M Wang

    (School of Public Administration, Fuzhou University
    Manchester Business School, The University of Manchester)

  • K S Chin

    (City University of Hong Kong)

  • J B Yang

    (School of Public Administration, Fuzhou University)

Abstract

The performances of decision-making units (DMUs) can be measured from two different points of view: optimistic or pessimistic, which leads to two different efficiencies for each DMU: the best relative efficiency and the worst relative efficiency. The conventional data envelopment analysis (DEA) considers only the best relative efficiency. It is argued that the two different efficiencies should be considered together and any approach considers only one of them is biased. This paper proposes to integrate the two different efficiencies into a geometric average efficiency, which measures the overall performance of each DMU. It is found that the geometric average efficiency has better discriminating power than either of the two efficiencies. This is illustrated by two numerical examples.

Suggested Citation

  • Y M Wang & K S Chin & J B Yang, 2007. "Measuring the performances of decision-making units using geometric average efficiency," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 58(7), pages 929-937, July.
    • Handle: RePEc:pal:jorsoc:v:58:y:2007:i:7:d:10.1057_palgrave.jors.2602205
    DOI: 10.1057/palgrave.jors.2602205
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    References listed on IDEAS

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    2. Joseph Paradi & Mette Asmild & Paul Simak, 2004. "Using DEA and Worst Practice DEA in Credit Risk Evaluation," Journal of Productivity Analysis, Springer, vol. 21(2), pages 153-165, March.
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    Cited by:

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    6. Awadh Pratap Singh & Musrrat Ali, 2023. "Development of Bi-Objective Fuzzy Data Envelopment Analysis Model to Measure the Efficiencies of Decision-Making Units," Mathematics, MDPI, vol. 11(6), pages 1-15, March.
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    8. Balk, Bert M. & (René) De Koster, M.B.M. & Kaps, Christian & Zofío, José L., 2021. "An evaluation of cross-efficiency methods: With an application to warehouse performance," Applied Mathematics and Computation, Elsevier, vol. 406(C).
    9. Róbert Štefko & Jarmila Horváthová & Martina Mokrišová, 2020. "Bankruptcy Prediction with the Use of Data Envelopment Analysis: An Empirical Study of Slovak Businesses," JRFM, MDPI, vol. 13(9), pages 1-15, September.
    10. Jiyoung Lee & Gyunghyun Choi, 2019. "A Dominance-Based Network Method for Ranking Efficient Decision-Making Units in Data Envelopment Analysis," Sustainability, MDPI, vol. 11(7), pages 1-20, April.
    11. Sabri Boubaker & T.D.Q. Le & R. Manita & T. Ngo, 2023. "The Trade-off Frontier for ESG and Sharpe Ratio: A Bootstrapped Double-Frontier Data Envelopment Analysis," Post-Print hal-04434028, HAL.
    12. Xuan Thi Thanh Mai & Ha Thi Nhu Nguyen & Thanh Ngo & Tu D. Q. Le & Lien Phuong Nguyen, 2023. "Efficiency of the Islamic Banking Sector: Evidence from Two-Stage DEA Double Frontiers Analysis," IJFS, MDPI, vol. 11(1), pages 1-14, February.
    13. Josef Jablonsky, 2012. "Multicriteria approaches for ranking of efficient units in DEA models," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 20(3), pages 435-449, September.
    14. Jarmila Horváthová & Martina Mokrišová & Martin Bača, 2023. "Bankruptcy Prediction for Sustainability of Businesses: The Application of Graph Theoretical Modeling," Mathematics, MDPI, vol. 11(24), pages 1-20, December.
    15. Farzaneh Asadi & Sohrab Kordrostami & Alireza Amirteimoori & Morteza Bazrafshan, 2023. "Inverse data envelopment analysis without convexity: double frontiers," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 46(1), pages 335-354, June.
    16. Yelin Fu & Yubing Sui & Hao Luo & Biao Han, 2020. "Application of Social Choice Theory to Modify the Value Measure of Health Systems," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 148(3), pages 1005-1019, April.
    17. De Jaeger, Simon & Rogge, Nicky, 2014. "Cost-efficiency in packaging waste management: The case of Belgium," Resources, Conservation & Recycling, Elsevier, vol. 85(C), pages 106-115.
    18. Adel Hatami-Marbini & Madjid Tavana & Kobra Gholami & Zahra Ghelej Beigi, 2015. "A Bounded Data Envelopment Analysis Model in a Fuzzy Environment with an Application to Safety in the Semiconductor Industry," Journal of Optimization Theory and Applications, Springer, vol. 164(2), pages 679-701, February.
    19. Habib Zare Ahmadabadi & Fatemeh Zamzam & Ali Emrouznejad & Alireza Naser Sadrabadi & Ali Morovati Sharifabadi, 2024. "A modified distance friction minimization model with optimistic–pessimistic target orientation for OECD sustainable performance measurement," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(9), pages 23113-23149, September.
    20. Wenli Liu & Ying-Ming Wang & Shulong Lv, 2017. "An aggressive game cross-efficiency evaluation in data envelopment analysis," Annals of Operations Research, Springer, vol. 259(1), pages 241-258, December.
    21. Vahed Ghiasi & Seyed Amir Reza Ghasemi & Mahyar Yousefi, 2021. "Landslide susceptibility mapping through continuous fuzzification and geometric average multi-criteria decision-making approaches," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 107(1), pages 795-808, May.
    22. Lei Chen & Fei-Mei Wu & Feng Feng & Fujun Lai & Ying-Ming Wang, 2018. "A Common Set of Weights for Ranking Decision-Making Units with Undesirable Outputs: A Double Frontiers Data Envelopment Analysis Approach," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 35(06), pages 1-25, December.

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