Improving envelopment in Data Envelopment Analysis under variable returns to scale |
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Authors: | Emmanuel Thanassoulis Mika Kortelainen Rachel Allen |
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Institution: | a OIM Group, Aston Business School, Aston University, Birmingham B4 7ET, United Kingdom b University of Manchester, Manchester M13 9PL, United Kingdom c Government Institute for Economic Research, Arkadiankatu 7, P.O. Box 1279, FI-00101 Helsinki, Finland d Warwick Business School, Warwick University, Coventry CV4 7AL, United Kingdom e ABB Group Process, P.O. Box 8131, Affolternstrasse 54, Zürich 8050, Switzerland |
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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. |
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Keywords: | Data Envelopment Analysis Efficiency Productivity Unobserved DMUs Value judgements |
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