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A novel median-based optimization model for eco-efficiency assessment in data envelopment analysis

Author

Listed:
  • Andreas Dellnitz

    (Leibniz-Fachhochschule School of Busines)

  • Madjid Tavana

    (La Salle University
    University of Paderborn)

  • Rajiv Banker

    (Temple University)

Abstract

Economic-environmental performance or eco-efficiency is a topic of great interest due to the “green movement.” Data Envelopment Analysis (DEA) is a non-parametric method for measuring the eco-efficiencies in comparable Decision-Making Units (DMUs) under various technology assumptions, e.g., constant or variable returns to scale. In the case of variable returns to scale, the returns to scale (RTS) values show whether the DMUs under consideration have the correct scale size or can be improved by upsizing or downsizing. However, sometimes the RTS values for some DMUs are unusually high or low and hence useless in practice. The RTS-mavericks test is devised to propose RTS bounds to fix this flaw. However, these bounds can be ineffective in practice. Even if this flaw is rectified, it needs to be clarified how the concept of RTS-mavericks influences eco-efficiency analysis. For the case of a single technology and a combination of two technologies (a so-called pollution-generating technology), we derive RTS equations and develop new median-based optimization problems to correct this flaw and show that the new concept can lead to non-convex technologies. We also demonstrate the applicability and exhibit the efficacy of the proposed model in the context of eco-efficiency analysis in the European Union.

Suggested Citation

  • Andreas Dellnitz & Madjid Tavana & Rajiv Banker, 2023. "A novel median-based optimization model for eco-efficiency assessment in data envelopment analysis," Annals of Operations Research, Springer, vol. 322(2), pages 661-690, March.
    • Handle: RePEc:spr:annopr:v:322:y:2023:i:2:d:10.1007_s10479-022-04937-4
    DOI: 10.1007/s10479-022-04937-4
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