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An epsilon-based measure of efficiency in DEA

Author

Listed:
  • Miki Tsutsui

    (Central Research Institute of Electric Power Industry)

  • Kaoru Tone

    (National Graduate Institute for Policy Studies)

Abstract

Firstly, we discuss differences between Farrell and Pareto-Koopmans efficiency measures in DEA, and propose a composite method for discriminating them. Then, we extend the method to so-called “epsilon based-measure (EBM).” The EBM can examine the robustness and stability of efficiency measure of DMUs regarding parametric change of input multiplier variables. Lastly, we propose a scheme for selecting an appropriate value of epsilon with recourse to actual cost shares of input resources.

Suggested Citation

  • Miki Tsutsui & Kaoru Tone, 2009. "An epsilon-based measure of efficiency in DEA," GRIPS Discussion Papers 09-13, National Graduate Institute for Policy Studies.
  • Handle: RePEc:ngi:dpaper:09-13
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    File URL: https://grips.repo.nii.ac.jp/?action=repository_action_common_download&item_id=1013&item_no=1&attribute_id=20&file_no=1
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    References listed on IDEAS

    as
    1. Charnes, A. & Cooper, W. W. & Huang, Z. M. & Sun, D. B., 1990. "Polyhedral Cone-Ratio DEA Models with an illustrative application to large commercial banks," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 73-91.
    2. Charnes, A. & Cooper, W. W. & Golany, B. & Seiford, L. & Stutz, J., 1985. "Foundations of data envelopment analysis for Pareto-Koopmans efficient empirical production functions," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 91-107.
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    Keywords

    Farrell efficiency; Pareto-Koopmans efficiency; stability analysis; EBM;

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