IDEAS home Printed from https://ideas.repec.org/a/eee/jomega/v32y2004i4p261-272.html
   My bibliography  Save this article

Establishing the "practical frontier" in data envelopment analysis

Author

Listed:
  • Sowlati, Taraneh
  • Paradi, Joseph C.

Abstract

Data envelopment analysis (DEA) assigns a score to each production unit (decision making unit--DMU) considered in the analysis. Such score indicates whether the unit is efficient or not. For inefficient units, it also identifies a hypothetical unit as the target and thus suggests improvements to their efficiency. However, for efficient units no further improvement can be indicated based on a DEA analysis. Nevertheless, it is important for management to indicate targets for their efficient units if the organization is to improve as a whole. Based on possible variations in the input and output levels of efficient DMUs, new units which are more efficient than DEA efficient units can be created to form a new improved frontier. This paper presents a linear programming model, P-DEA, and a methodology for improving the efficiency of empirically efficient units by defining a new "practical frontier" and utilizing management input. Available bank branch data was used to illustrate the applicability of this theoretical development. The sensitivity of the results to the parameters defined by management in the P-DEA model was also examined, which proved the robustness of the proposed model.

Suggested Citation

  • Sowlati, Taraneh & Paradi, Joseph C., 2004. "Establishing the "practical frontier" in data envelopment analysis," Omega, Elsevier, vol. 32(4), pages 261-272, August.
  • Handle: RePEc:eee:jomega:v:32:y:2004:i:4:p:261-272
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0305-0483(03)00150-6
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Cook, Wade D. & Kress, Moshe & Seiford, Lawrence M., 1992. "Prioritization models for frontier decision making units in DEA," European Journal of Operational Research, Elsevier, vol. 59(2), pages 319-323, June.
    2. Zhu, Joe, 2003. "Imprecise data envelopment analysis (IDEA): A review and improvement with an application," European Journal of Operational Research, Elsevier, vol. 144(3), pages 513-529, February.
    3. Wilson, Paul W, 1993. "Detecting Outliers in Deterministic Nonparametric Frontier Models with Multiple Outputs," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(3), pages 319-323, July.
    4. Per Andersen & Niels Christian Petersen, 1993. "A Procedure for Ranking Efficient Units in Data Envelopment Analysis," Management Science, INFORMS, vol. 39(10), pages 1261-1264, October.
    5. Kao, Chiang, 1994. "Efficiency improvement in data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 73(3), pages 487-494, March.
    6. Mette Asmild & Joseph Paradi & Vanita Aggarwall & Claire Schaffnit, 2004. "Combining DEA Window Analysis with the Malmquist Index Approach in a Study of the Canadian Banking Industry," Journal of Productivity Analysis, Springer, vol. 21(1), pages 67-89, January.
    7. Zhu, Joe, 1996. "Robustness of the efficient DMUs in data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 90(3), pages 451-460, May.
    8. Sinuany-Stern, Zilla & Friedman, Lea, 1998. "DEA and the discriminant analysis of ratios for ranking units," European Journal of Operational Research, Elsevier, vol. 111(3), pages 470-478, December.
    9. Schaffnit, Claire & Rosen, Dan & Paradi, Joseph C., 1997. "Best practice analysis of bank branches: An application of DEA in a large Canadian bank," European Journal of Operational Research, Elsevier, vol. 98(2), pages 269-289, April.
    10. William W. Cooper & Kyung Sam Park & Gang Yu, 1999. "IDEA and AR-IDEA: Models for Dealing with Imprecise Data in DEA," Management Science, INFORMS, vol. 45(4), pages 597-607, April.
    11. 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.
    12. 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.
    13. Seiford, Lawrence M. & Zhu, Joe, 1998. "Stability regions for maintaining efficiency in data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 108(1), pages 127-139, July.
    14. E. Thanassoulis & R. Allen, 1998. "Simulating Weights Restrictions in Data Envelopment Analysis by Means of Unobserved DMUs," Management Science, INFORMS, vol. 44(4), pages 586-594, April.
    15. Charnes, A. & Neralic, L., 1990. "Sensitivity analysis of the additive model in data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 48(3), pages 332-341, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sunil Kumar & Rachita Gulati, 2009. "Did efficiency of Indian public sector banks converge with banking reforms?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 56(1), pages 47-84, March.
    2. Paradi, Joseph C. & Zhu, Haiyan, 2013. "A survey on bank branch efficiency and performance research with data envelopment analysis," Omega, Elsevier, vol. 41(1), pages 61-79.
    3. Eskelinen, Juha & Halme, Merja & Kallio, Markku, 2014. "Bank branch sales evaluation using extended value efficiency analysis," European Journal of Operational Research, Elsevier, vol. 232(3), pages 654-663.
    4. Soares de Mello, João Carlos C.B. & Angulo Meza, Lidia & da Silveira, Juliana Quintanilha & Gomes, Eliane Gonçalves, 2013. "About negative efficiencies in Cross Evaluation BCC input oriented models," European Journal of Operational Research, Elsevier, vol. 229(3), pages 732-737.
    5. Thanassoulis, Emmanuel & Kortelainen, Mika & Allen, Rachel, 2012. "Improving envelopment in Data Envelopment Analysis under variable returns to scale," European Journal of Operational Research, Elsevier, vol. 218(1), pages 175-185.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:32:y:2004:i:4:p:261-272. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.