Incorporating performance measures with target levels in data envelopment analysis

Sungmook Lim, Joe Zhu

Research output: Contribution to journalArticlepeer-review

26 Scopus citations

Abstract

Data envelopment analysis (DEA) is a technique for evaluating relative efficiencies of peer decision making units (DMUs) which have multiple performance measures. These performance measures have to be classified as either inputs or outputs in DEA. DEA assumes that higher output levels and/or lower input levels indicate better performance. This study is motivated by the fact that there are performance measures (or factors) that cannot be classified as an input or output, because they have target levels with which all DMUs strive to achieve in order to attain the best practice, and any deviations from the target levels are not desirable and may indicate inefficiency. We show how such performance measures with target levels can be incorporated in DEA. We formulate a new production possibility set by extending the standard DEA production possibility set under variable returns-to-scale assumption based on a set of axiomatic properties postulated to suit the case of targeted factors. We develop three efficiency measures by extending the standard radial, slacks-based, and Nerlove-Luenberger measures. We illustrate the proposed model and efficiency measures by applying them to the efficiency evaluation of 36 US universities.

Original languageEnglish
Pages (from-to)634-642
Number of pages9
JournalEuropean Journal of Operational Research
Volume230
Issue number3
DOIs
StatePublished - 1 Nov 2013

Keywords

  • Data envelopment analysis (DEA)
  • Efficiency
  • Performance measure
  • Target level

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