A universal solution for units-invariance in data envelopment analysis

Xu, Jin and Zervopoulos, Panagiotis and Qian, Zhenhua and Cheng, Gang (2012): A universal solution for units-invariance in data envelopment analysis.

Abstract

The directional distance function model is a generalization of the radial model in data envelopment analysis (DEA). The directional distance function model is appropriate for dealing with cases where undesirable outputs exist. However, it is not a units-invariant measure of efficiency, which limits its accuracy. In this paper, we develop a data normalization method for DEA, which is a universal solution for the problem of units-invariance in DEA. The efficiency scores remain unchanged when the original data are replaced with the normalized data in the existing units-invariant DEA models, including the radial and slack-based measure models, i.e., the data normalization method is compatible with the radial and slack-based measure models. Based on normalized data, a units-invariant efficiency measure for the directional distance function model is defined.

• Item Type: MPRA Paper
• Language: English
• Keywords: Data Envelopment Analysis; Data normalization; Units-invariance; Directional distance function
• Subjects: C - Mathematical and Quantitative Methods > C0 - General > C02 - Mathematical Methods; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C67 - Input-Output Models; D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity

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