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Terminal units in DEA: definition and determination

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  • Vladimir Krivonozhko
  • Finn Førsund
  • Andrey Lychev

Abstract

Applications of data envelopment analysis (DEA) models show that inadequate results may arise in some cases, two of these inadequacies being: (1) too many efficient units may appear in some DEA models; (2) a DEA model may show an inefficient unit from the point of view of experts as an efficient one. The purpose of this paper is to identify units that may unduly become efficient. The concept of a terminal unit is introduced for such units. It is shown by establishing theorems how units can be identified as terminal units. An approach for improving the adequacy of DEA models based on terminal units is suggested, and an example shown based on a real-life data set for Russian banks. Copyright Springer Science+Business Media New York 2015

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  • Vladimir Krivonozhko & Finn Førsund & Andrey Lychev, 2015. "Terminal units in DEA: definition and determination," Journal of Productivity Analysis, Springer, vol. 43(2), pages 151-164, April.
    • Handle: RePEc:kap:jproda:v:43:y:2015:i:2:p:151-164
    DOI: 10.1007/s11123-013-0375-6
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    Cited by:

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    3. Mehdiloo, Mahmood & Podinovski, Victor V., 2021. "Strong, weak and Farrell efficient frontiers of technologies satisfying different production assumptions," European Journal of Operational Research, Elsevier, vol. 294(1), pages 295-311.
    4. Førsund, Finn & Krivonozhko, Vladimir W & Lychev, Andrey V., 2016. "Smoothing the frontier in the DEA models," Memorandum 11/2016, Oslo University, Department of Economics.
    5. Ole Bent Olesen & Niels Christian Petersen & Victor V. Podinovski, 2022. "The structure of production technologies with ratio inputs and outputs," Journal of Productivity Analysis, Springer, vol. 57(3), pages 255-267, June.
    6. Krivonozhko, Vladimir E. & Førsund, Finn R. & Lychev, Andrey V., 2012. "Identifying Suspicious Efficient Units in DEA Models," Memorandum 30/2012, Oslo University, Department of Economics.
    7. Dariush Akbarian & Ali Akbar Bani & Mohsen Rostamy-Malkhalifeh & Farhad Hosseinzadeh Lotfi, 2022. "An algorithm for the anchor points of the PPS of the BCC model," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-14, December.
    8. Amin Mostafaee & Sevan Sohraiee, 2019. "The role of hyperplanes for characterizing suspicious units in DEA," Annals of Operations Research, Springer, vol. 275(2), pages 531-549, April.

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    More about this item

    Keywords

    Data envelopment analysis (DEA); Terminal units; Efficiency; Weight restrictions; Domination cones; C44; C61; C67; D24;
    All these keywords.

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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