Data Envelopment Analysis

Weights Optimization
( )
0
0
1
1 1
1
.
0 1,...,
2
1
1,...,
1,...,
s
r rJ
r
s m
r rj i ij
r i
m
i iJ
i
r
i
Max u y
s t
u y v x j N
M
v x
u r s
v i m
c
c
=
= =
=

`
)
s =
=
> =
> =

Primal Dual Relations

( )
0
0
1
1 1
1
.
0 1,...,
2
1
1,...,
1,...,
s
r rJ
r
s m
r rj i ij
r i
m
i iJ
i
r
i
Max u y
s t
u y v x j N
M
v x
u r s
v i m
c
c
=
= =
=

`
)
s =
=
> =
> =

( )
0
0
0
1 1
0
1
1
0
.
0 1,...,
3 1,...,
0 1,...,
, 0 1,..., ; 1,...,
free
m s
i r
i r
N
j ij iJ i
j
N
j rj r rJ
j
j
i r
Min k S S
s t
x k x S i m
M y S y r s
j N
S S i m r s
k
c

+
= =

=
+
=
+

(
+
`
(

)
+ = =
= =
> =
> = =

Minimize Inputs Interpretation

( )
0
0
0
1 1
0
1
1
0
.
0 1,...,
3 1,...,
0 1,...,
, 0 1,..., ; 1,...,
free
m s
i r
i r
N
j ij iJ i
j
N
j rj r rJ
j
j
i r
Min k S S
s t
x k x S i m
M y S y r s
j N
S S i m r s
k
c

+
= =

=
+
=
+

(
+
`
(

)
+ = =
= =
> =
> = =

Graphic Illustration

Conclusions From Optimality
* *
0
i r
S S

+
= =
*
0
1 k =
Pareto Efficient
*
0
k
Technical Input Efficiency
*
1
*
1
1,...,
1,...,
N
t
i j ij
j
N
t
r j rj
j
x x i m
y y r s

=
=
= =
= =

Efficient Goal and

Efficient Peers
Maximize Outputs
( )
0
0
0 0
0
1 1
1
1
.
1,...,
4 0 1,...,
0 1,...,
, 0 1,..., ; 1,...,
free
m s
J i r
i r
N
j ij i iJ
j
N
j rj J rJ r
j
j
i r
J
Max h I O
s t
x I x i m
M y h y O r s
j N
I O i m r s
h
c
o
o
o
= =
=
=

(
+ +
`
(

)
+ = =
= =
> =
> = =

Conclusions From Optimality

0
*
1
J
h =
* *
0
r i
O I = =
Pareto Efficient
0
*
1
J
h
Technical Output Efficiency
0
*
*
0
1
J
k
h
=
Return to Scale
Modeling Return to Scale
( )
0
0
0
1 1
0
1
1
1
0
.
0 1,...,
5 1,...,
1
0 1,...
, 0 1,..., ; 1,...,
free
m s
i r
i r
N
j ij iJ i
j
N
j rj r rJ
j
N
j
j
j
i r
Min k S S
s t
x k x S i m
M y S y r s
j N
S S i m r s
k
c

+
= =

=
+
=
=
+

(
+
`
(

)
+ = =
= =
=
> =
> = =

( )
0
0
0
1 1
0
1
1
0
.
0 1,...,
3 1,...,
0 1,...,
, 0 1,..., ; 1,...,
free
m s
i r
i r
N
j ij iJ i
j
N
j rj r rJ
j
j
i r
Min k S S
s t
x k x S i m
M y S y r s
j N
S S i m r s
k
c

+
= =

=
+
=
+

(
+
`
(

)
+ = =
= =
> =
> = =

Numeric Example
Numeric Example
( )
{ }
1 2
1 2 1 2 3 4
1 2 1 2 3 4
1 2 1 2 3 4
1 2 1 2 3 4
1 2 3 4
1 2
1 2 3 4
3 10
.
3 10 370 13 14 5 0
5 40 320 12 16 3 0
7 2 30 410 19 13 4 0
3 50 190 10 15 2 0
370 13 14 5 1
,
, , ,
Max u u
s t
u u v v v v
u u v v v v
M u u v v v v
u u v v v v
v v v v
u u
v v v v
c
c
+
+ s
+ s
+ s
+ s
+ + + =
>
>
Numeric Example
( )
{ }
1 2
1 2 1 2 3 4
1 2 1 2 3 4
1 2 1 2 3 4
1 2 1 2 3 4
1 2 3 4
1 2
1 2 3 4
3 10
.
3 10 370 13 14 5 0
5 40 320 12 16 3 0
7 2 30 410 19 13 4 0
3 50 190 10 15 2 0
370 13 14 5 1
,
, , ,
Max u u
s t
u u v v v v
u u v v v v
M u u v v v v
u u v v v v
v v v v
u u
v v v v
c
c
+
+ s
+ s
+ s
+ s
+ + + =
>
>
1
2
1
1 2
2
3
4
0.199
0.001
0.001
3 10 0.607
0.001
0.044
0.001
u
u
v
u u
v
v
v
| | | |
| |
| |
| |
= + =
| |
| |
| |
| |
| |
\ . \ .
Numeric Example
( )
{ }
1 2
1 2 1 2 3 4
1 2 1 2 3 4
1 2 1 2 3 4
1 2 1 2 3 4
1 2 3 4
1 2
1 2 3 4
5 40
.
3 10 370 13 14 5 0
5 40 320 12 16 3 0
8 2 30 410 19 13 4 0
3 50 190 10 15 2 0
320 12 16 3 1
,
, ,
Max u u
s t
u u v v v v
u u v v v v
M u u v v v v
u u v v v v
v v v v
u u
v v v v
c
c
+
+ s
+ s
+ s
+ s
+ + + =
>
>
1
2
1
1 2
2
3
4
0.001
0.020
0.005
5 40 1
0.001
0.001
0.001
u
u
v
u u
v
v
v
| | | |
| |
| |
| |
= + =
| |
| |
| |
| |
| |
\ . \ .
Numeric Example
( )
{ }
0 1 2 3 4 1 2
1 2 3 4 0 1
1 2 3 4 0 2
1 2 3 4 0 3
1 2 3 4 0 4
1 2 3 4 1
1 2 3 4
.
370 320 410 190 410 0
13 12 19 10 19 0
14 16 13 15 13 0
9 5 3 4 2 4 0
3 5 2 3 2
10 40 30 50
Min k S S S S S S
s t
k S
k S
k S
M k S
S
c






+ +

+
( + + + + +

+ + + + =
+ + + + =
+ + + + =
+ + + + =
+ + + =
+ + +
2
1 2 3 4
1 2 3 4 1 2
0
30
, , , 0
, , , , , 0
S
S S S S S S
k free

+
+ +
=
>
>
M
3
is inefficient
M
2
and M
4
are efficient
peers
DEA Software

Summary, Pros and Cons
Avoids arbitrary selection of weights.
Uses the theory of mathematical
programming.
Need to solve n programs.
Assumes deterministic measurements.
Requires a sufficient number of units.

Summary, Pros and Cons
Requires units to use the same exact
variables.
Insufficient conclusions for decision
making.
Use of discrete or even categorical values.
Unchangeable values.