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A Bi-Extremal Principle for Frontier Estimation and Efficiency Evaluations

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Author Info

  • R. D. Banker

    (Carnegie-Mellon University)

  • A. Charnes

    (University of Texas at Austin)

  • W. W. Cooper

    (University of Texas at Austin)

  • A. P. Schinnar

    (University of Pennsylvania)

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    Abstract

    A new approach is supplied for locating efficiency frontiers and evaluating the efficiency of Decision Making Units (DMU's). This is accomplished from observational data by means of an envelopment procedure called DEA (Data Envelopment Analysis) originally developed by Charnes, Cooper and Rhodes (Charnes, A., W. W. Cooper, E. Rhodes, 1978. Measuring the efficiency of decision making units. Eur. J. Oper. Res. 2 (6). See also, Short communication. Eur. J. Oper. Res. 3 (1979) 339.) in connection with their ratio formulation for relative efficiency measurement. The current variant employs a bi-extremal principle which, though nonlinear, is subsequently shown to be reducible to a finite sequence of linear programming problems. The development is illustrated by means of multiple output functions which are piecewise of Cobb-Douglas or general log linear type and which also allow for increasing, decreasing and constant returns to scale. More than one production function for the DMU's is also allowed. The reduction of the bi-extremal principle to linear programming equivalence is also accomplished for much more general classes of functions. A numerical example illustrates some of these ideas and also provides a springboard for a new theorem which relates these efficiency measures to ones which were supplied earlier in the Charnes, Cooper and Rhodes's work (Charnes, A., W. W. Cooper, E. Rhodes, 1978. Measuring the efficiency of decision making units. Eur. J. Oper. Res. 2 (6). See also, Short communication. Eur. J. Oper. Res. 3 (1979) 339.).

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    File URL: http://dx.doi.org/10.1287/mnsc.27.12.1370
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 27 (1981)
    Issue (Month): 12 (December)
    Pages: 1370-1382

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    Handle: RePEc:inm:ormnsc:v:27:y:1981:i:12:p:1370-1382

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    Keywords: efficiency; decision making units; production functions; efficiency frontiers;

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    Cited by:
    1. Mehdiloozad, Mahmood & Sahoo, Biresh K. & Roshdi, Israfil, 2014. "A generalized multiplicative directional distance function for efficiency measurement in DEA," European Journal of Operational Research, Elsevier, vol. 232(3), pages 679-688.
    2. Pina, Vicente & Torres, Lourdes, 2001. "Analysis of the efficiency of local government services delivery. An application to urban public transport," Transportation Research Part A: Policy and Practice, Elsevier, vol. 35(10), pages 929-944, December.
    3. Banker, Rajiv D. & Cooper, William W. & Seiford, Lawrence M. & Thrall, Robert M. & Zhu, Joe, 2004. "Returns to scale in different DEA models," European Journal of Operational Research, Elsevier, vol. 154(2), pages 345-362, April.

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