An epsilon-based measure of efficiency in DEA
AbstractFirstly, we discuss differences between Farrell and Pareto-Koopmans efficiency measures in DEA, and propose a composite method for discriminating them. Then, we extend the method to so-called “epsilon based-measure (EBM).” The EBM can examine the robustness and stability of efficiency measure of DMUs regarding parametric change of input multiplier variables. Lastly, we propose a scheme for selecting an appropriate value of epsilon with recourse to actual cost shares of input resources.
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Bibliographic InfoPaper provided by National Graduate Institute for Policy Studies in its series GRIPS Discussion Papers with number 09-13.
Length: 25 pages
Date of creation: Sep 2009
Date of revision:
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Farrell efficiency; Pareto-Koopmans efficiency; stability analysis; EBM;
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- Charnes, A. & Cooper, W. W. & Huang, Z. M. & Sun, D. B., 1990. "Polyhedral Cone-Ratio DEA Models with an illustrative application to large commercial banks," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 73-91.
- Charnes, A. & Cooper, W. W. & Golany, B. & Seiford, L. & Stutz, J., 1985. "Foundations of data envelopment analysis for Pareto-Koopmans efficient empirical production functions," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 91-107.
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