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Finding Efficiency in Data Envelopment Analysis Using Variable Reduction Technique

In: Quality, IT and Business Operations

Author

Listed:
  • Seema Gupta

    (Devi Ahilya University Indore)

  • K. N. Rajeshwari

    (Devi Ahilya University Indore)

  • P. C. Jha

    (University of Delhi)

Abstract

Data envelopment analysis is one of the multi-criteria techniques used for finding efficiency of different decision-making units (DMUs) based on value of inputs consumed and outputs produced. The efficiency of considered DMU is determined by optimizing ratio of weighted sum of outputs to the weighted sum of inputs. Traditional DEA model differentiates between efficient and inefficient DMUs based on their calculated efficiency value. A DMU is efficient if its efficiency value is one. However, there are cases where this differentiation becomes difficult with large number of inputs and outputs, in comparison with number of DMUs. In such scenario, most of DMUs become efficient since calculated efficiency value comes out to be 1. Hence, variable reduction technique is used in DEA model to aggregate some of the inputs and outputs so that the rule of thumb is satisfied. This way discriminating power of DMU model is enhanced and differentiation becomes evident. A numerical example is also considered to show the utility of the model.

Suggested Citation

  • Seema Gupta & K. N. Rajeshwari & P. C. Jha, 2018. "Finding Efficiency in Data Envelopment Analysis Using Variable Reduction Technique," Springer Proceedings in Business and Economics, in: P.K. Kapur & Uday Kumar & Ajit Kumar Verma (ed.), Quality, IT and Business Operations, pages 155-164, Springer.
    • Handle: RePEc:spr:prbchp:978-981-10-5577-5_13
    DOI: 10.1007/978-981-10-5577-5_13
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