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How Can We Use the Result from a DEA Analysis? Identification of Firm-relevant Reference Units

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Abstract

Two types of guidelines can be obtained from a DEA (data envelopment analysis) analysis. Firstly, the firm can reduce input or increase production according to the DEA results. Secondly, an inefficient firm might be able to identify reference units. This makes it possible for the inefficient firm to, on site, study production that is more efficient, and thereby get information on e.g. efficient organisational solutions. In this study, we focus on how to detect these firm-relevant reference units. While applying the existing methods for identification of reference units, i.e. the intensity variable method and the dominance method, on a data set concerning booking centres in the Swedish taxi market, shortcomings in these methods were identified. This motivates the development of a new method. This new method, the sphere measure, enables an inefficient unit to identify existing and efficient units that have the largest similarity with itself. The identified units will thus be firm-relevant reference units.

Suggested Citation

  • Jonas MÃ¥nsson, 2003. "How Can We Use the Result from a DEA Analysis? Identification of Firm-relevant Reference Units," Journal of Applied Economics, Universidad del CEMA, vol. 6, pages 157-175, May.
    • Handle: RePEc:cem:jaecon:v:6:y:2003:n:1:p:157-175
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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