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DEA-based hypothesis tests for comparing two groups of decision making units


  • Banker, Rajiv D.
  • Zheng, Zhiqiang (Eric)
  • Natarajan, Ram


In this paper, we develop five statistical tests to compare the efficiencies of different groups of DMUs. We consider a data generating process (DGP) that models the deviation of the output from the best practice frontier as the sum of two components, a one-sided inefficiency term and a two-sided random noise term. We use simulation to evaluate the performance of the five tests against the Banker tests (Banker, 1993) that were designed for DGPs containing a single one-sided error term. It is found that while the Banker tests are very effective when efficiency dominates noise, the tests developed in this paper perform better than the Banker tests when noise levels are significant.

Suggested Citation

  • Banker, Rajiv D. & Zheng, Zhiqiang (Eric) & Natarajan, Ram, 2010. "DEA-based hypothesis tests for comparing two groups of decision making units," European Journal of Operational Research, Elsevier, vol. 206(1), pages 231-238, October.
  • Handle: RePEc:eee:ejores:v:206:y:2010:i:1:p:231-238

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    References listed on IDEAS

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    Cited by:

    1. Alperovych, Yan & Hübner, Georges & Lobet, Fabrice, 2015. "How does governmental versus private venture capital backing affect a firm's efficiency? Evidence from Belgium," Journal of Business Venturing, Elsevier, vol. 30(4), pages 508-525.
    2. Alperovych, Yan & Amess, Kevin & Wright, Mike, 2013. "Private equity firm experience and buyout vendor source: What is their impact on efficiency?," European Journal of Operational Research, Elsevier, vol. 228(3), pages 601-611.
    3. Ghasemi, M.-R. & Ignatius, Joshua & Emrouznejad, Ali, 2014. "A bi-objective weighted model for improving the discrimination power in MCDEA," European Journal of Operational Research, Elsevier, vol. 233(3), pages 640-650.
    4. Antonella Basso & Stefania Funari, 2014. "The role of fund size in the performance of mutual funds assessed with DEA models," Working Papers 18, Department of Management, Università Ca' Foscari Venezia.
    5. Basso, Antonella & Funari, Stefania, 2014. "Constant and variable returns to scale DEA models for socially responsible investment funds," European Journal of Operational Research, Elsevier, vol. 235(3), pages 775-783.
    6. Macpherson, Alexander J. & Principe, Peter P. & Smith, Elizabeth R., 2010. "A directional distance function approach to regional environmental-economic assessments," Ecological Economics, Elsevier, vol. 69(10), pages 1918-1925, August.
    7. Claudio Pinto, 2014. "Efficiency comparison for directly managed public hospitals for different geographical area in Italy," Working papers 5, Società Italiana di Economia Pubblica.


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