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Data Envelopment Analysis for Performance Evaluation: A Child’s Guide

Author

Listed:
  • RAY, SUBHASH C.

    (University of Connecticut)

  • CHEN, LEI

    (University of Connecticut)

Abstract

In this paper we offer a simple exposition of the neoclassical production theoretic foundations of Data Envelopment Analysis. The concepts of technical efficiency (both input- and output-oriented), scale efficiency, and cost efficiency are explained and the corresponding DEA models are described in details. We offer step-by-step instruction on how to write the codes for solving the various DEA models using the Solver option in the widely accessible MS Excel software. An important feature of this paper is a detailed exposition of how to write various Visual Basic Macro programs for solving DEA problems. We also describe the non-convex Free Disposal Hull (FDH) procedure and the secondstage regression analysis that seeks to account for variation in measured efficiency scores due to external factors.

Suggested Citation

  • Ray, Subhash C. & Chen, Lei, 2010. "Data Envelopment Analysis for Performance Evaluation: A Child’s Guide," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 45(2), pages 79-124.
  • Handle: RePEc:dse:indecr:0024
    as

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    References listed on IDEAS

    as
    1. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
    2. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    3. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
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    More about this item

    Keywords

    Efficiency; Linear Programming; Benchmarking; Excel Solver;

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact

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