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The Directional Distance Function and Measurement of Super-Efficiency: An Application to Airlines Data

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  • Subhash C. Ray

    (University of Connecticut)

Abstract

Lovell and Rouse (LR) have recently proposed a modification of the standard DEA model that overcomes the infeasibility problem often encountered in computing super-efficiency. In the LR procedure one appropriately scales up the observed input vector (scale down the output vector) of the relevant super-efficient firm thereby usually creating its inefficient surrogate. An alternative procedure proposed in this paper uses the directional distance function introduced by Chambers, Chung, and Fare and the resulting Nerlove-Luenberger (NL) measure of super-efficiency. The fact that the directional distance function combines features of both an input-oriented and an output-oriented model, generally leads to a more complete ranking of the observations than either of the oriented models. An added advantage of this approach is that the NL super-efficiency measure is unique and does not depend on any arbitrary choice of a scaling parameter. A data set on international airlines from Coelli, Perelman, and Griffel-Tatje (2002) is utilized in an illustrative empirical application.

Suggested Citation

  • Subhash C. Ray, 2004. "The Directional Distance Function and Measurement of Super-Efficiency: An Application to Airlines Data," Working papers 2004-16, University of Connecticut, Department of Economics.
    • Handle: RePEc:uct:uconnp:2004-16
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