Efficiency Evaluations Based on Potential (Non-Proportional) Improvements
Efficiency evaluation of a Decision Making Unit (DMU) involves two issues: 1) selection of an appropriate reference plan against which to evaluate the DMU and 2) measurement of performance slack. In the literature, these issues are mixed in one and the same operation but we argue that it has theoretical as well as practical advantages to separate them. We provide an axiomatic characterization of the implicit Farrell selection. This approach, ignores important aspects of the technology by focussing on proportional variations in inputs (or outputs). We propose a new approach where potential improvements are used to guide the selection of reference plans. A characterization of this approach is provided and an associated translation invariant, strictly monotonous and continuous efficiency index is suggested. Copyright Kluwer Academic Publishers 1999
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Volume (Year): 12 (1999)
Issue (Month): 3 (November)
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References listed on IDEAS
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- Luenberger, David G., 1992. "Benefit functions and duality," Journal of Mathematical Economics, Elsevier, vol. 21(5), pages 461-481.
- Hougaard, Jens Leth & Tvede, Mich, 2002.
"Benchmark selection: An axiomatic approach,"
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Elsevier, vol. 137(1), pages 218-228, February.
- Jens Leth Hougaard & Mich Tvede, 2001. "Benchmark Selection: An Axiomatic Approach," Discussion Papers 01-06, University of Copenhagen. Department of Economics.
- Peter Bogetoft, 1994. "Incentive Efficient Production Frontiers: An Agency Perspective on DEA," Management Science, INFORMS, vol. 40(8), pages 959-968, August.
- Fare, Rolf & Knox Lovell, C. A., 1978. "Measuring the technical efficiency of production," Journal of Economic Theory, Elsevier, vol. 19(1), pages 150-162, October. Full references (including those not matched with items on IDEAS)
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