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Network DEA: Efﬁciency analysis of organizations with complex

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Article in Computers & Operations Research · August 2004

DOI: 10.1016/S0305-0548(03)00095-9 · Source: DBLP
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Computers & Operations Research 31 (2004) 1365 – 1410

www.elsevier.com/locate/dsw
Network DEA: e(ciency analysis of organizations with

complex internal structure
Herbert F. Lewisa;∗ , Thomas R. Sextonb
a
Harriman School for Management and Policy, State University of New York at Stony Brook, Stony Brook,
NY 11794-3775, USA
b
Harriman School for Management and Policy, State University of New York at Stony Brook, Stony Brook,
NY 11794-3775, USA
Abstract
DEA models treat the DMU as a “black box.” Inputs enter and outputs exit, with no consideration of the
intervening steps. Consequently, it is di(cult, if not impossible, to provide individual DMU managers with
speci;c information regarding the sources of ine(ciency within their DMUs. We show how to use DEA to
look inside the DMU, allowing greater insight as to the sources of organizational ine(ciency. Our model
applies to DMUs that consist of a network of Sub-DMUs, some of which consume resources produced by
other Sub-DMUs and some of which produce resources consumed by other Sub-DMUs. Our Network DEA
Model allows for either an input orientation or an output orientation, any of the four standard assumptions
regarding returns to scale in any Sub-DMU, and adjustments for site characteristics in each Sub-DMU. We
demonstrate how to incorporate reverse quantities as inputs, intermediate products, or outputs. Thus, we can
apply the Network DEA Model presented here in many managerial contexts. We also prove some theoretical
properties of the Network DEA Model.
By applying the Network DEA Model to Major League Baseball, we demonstrate the advantages of the
Network DEA Model over the standard DEA Model. Speci;cally, the Network DEA Model can detect in-
e(ciencies that the standard DEA Model misses. Perhaps of greatest signi;cance, the Network DEA Model
allows individual DMU managers to focus e(ciency-enhancing strategies on the individual stages of the
production process.
? 2003 Elsevier Ltd. All rights reserved.
Keywords: Data envelopment analysis; Networks; E(ciency; Productivity; Major league baseball
∗
Corresponding author. Tel.: +1-631-632-7172; fax: +1-631-632-9412.
E-mail addresses: hlewis@notes.cc.sunysb.edu (H.F. Lewis), tsexton@notes.cc.sunysb.edu (T.R. Sexton).
0305-0548/$ - see front matter ? 2003 Elsevier Ltd. All rights reserved.
doi:10.1016/S0305-0548(03)00095-9
1366 H.F. Lewis, T.R. Sexton / Computers & Operations Research 31 (2004) 1365 – 1410
1. Introduction
Data envelopment analysis (DEA) is a linear programming-based methodology for evaluating the
relative e(ciency of each member of a set of organizational units. The units, called decision-making
units (DMUs), consume various levels of each speci;ed input and produce various levels of each
speci;ed output. DEA evaluates the e(ciency of a DMU relative to an empirical production possi-
bility frontier determined by all DMUs under appropriate assumptions regarding returns to scale and
orientation.
DEA makes no assumptions concerning the internal operations of a DMU. Rather, DEA treats
each DMU as a “black box” by considering only the inputs consumed and outputs produced by
each DMU. This perspective is often appropriate and su(cient. For example, if the purpose of the
analysis is to identify ine(cient DMUs and evaluate the extent of their ine(ciency, then a “black
box” approach is adequate. However, such an approach provides no insight regarding the sources of
ine(ciency and cannot provide process-speci;c guidance to DMU managers to help them improve
the DMU’s e(ciency.
Castelli et al. [1] described a DEA-like model that evaluates the e(ciencies of each of a number
of interdependent sub-units within a larger DMU. Their analysis assesses sub-unit e(ciency relative
to other sub-units within the same DMU. This model is attractive because it allows a DMU manager
to assess e(ciencies within the DMU without access to data from other DMUs. However, their
approach may result in very small reference sets, thereby limiting the number of inputs and outputs
that can be included and possibly leading to inKated e(ciency scores.
In Sexton and Lewis [2], we considered an extension of the DEA model in which each DMU is
comprised of two Sub-DMUs connected in series. In that model, the Stage 1 Sub-DMU consumes
inputs to produce intermediate products. These, in turn, are the inputs to the Stage 2 Sub-DMU,
which uses them to produce the DMU’s outputs. The objective of the two-stage DEA Model is to
evaluate the relative e(ciencies of each DMU and each of its Sub-DMUs.
While we believe that the two-stage DEA Model describes many important settings, we recognize
that we may require more complexity in other cases. In this article, we develop a Network DEA
Model in which the internal design of the production process is more intricate. Speci;cally, we
assume that each DMU is comprised of a set of Sub-DMUs. Each input to a Sub-DMU is either exo-
genous to the DMU or is the output of another Sub-DMU. Similarly, each output from a Sub-DMU
either leaves the DMU or is an input to another Sub-DMU. See Fig. 1. Consider the directed graph
in which the nodes correspond to Sub-DMUs and the arcs correspond to Kows from one Sub-DMU
to another. We assume that this graph is acyclic.
We are not the ;rst to consider the network DEA Model. FLare and Whittaker [3] and FLare and
Grosskopf [4] have presented similar models. Those models de;ne the reference set for the DMU
as the set of all convex linear combinations of DMUs, as is the common practice in DEA. In our
model, we de;ne the reference set for the DMU based on the hypothetical Sub-DMUs identi;ed for
each Sub-DMU.
We apply the Network DEA Model to major league baseball (MLB). Two Sub-DMUs corre-
spond to the team’s front o(ce operation, which uses money in the form of player salaries to
acquire talent. Three Sub-DMUs correspond to the team’s on-;eld operation, which utilize the
talent to win games. This analysis is a generalization of that presented in Sexton and
Lewis [2].
H.F. Lewis, T.R. Sexton / Computers & Operations Research 31 (2004) 1365 – 1410 1367
DMU d
Multiple
Inputs
Multiple Multiple
Other Other
Intermediate Sub-DMU s Intermediate
Sub-DMUs Products Products Sub-DMUs
Multiple
Outputs
Fig. 1. Internal structure of a DMU in a Network DEA Model.
We argue that it is crucial for the team’s ownership to identify the extent of ine(ciency within
each Sub-DMU. Ine(ciency in a front o(ce Sub-DMU suggests that the team evaluates oNensive
or defensive talent poorly and pays players more than they are worth. Ine(ciency in an on-;eld
Sub-DMU, however, indicates that the team is unable to produce or prevent as many runs as war-
ranted by their talent level or produce as many victories as warranted by the runs they score and
prevent. (DEA is a deterministic method that ignores random variation such as players having ex-
ceptionally good or bad years. At the team level, DEA assumes that such random variations cancel
one another su(ciently to allow a deterministic analysis. Other methods, such as stochastic fron-
tier analysis (see Kumbhakar and Knox Lovell [5]), explicitly allow for such random variation).
Knowing the sources of ine(ciency within an organization allows management to develop focused
interventions designed to improve organizational performance.
2. Network DEA Model formulation
We ;rst present the Network DEA Model using an output orientation, indicating the modi;cations
necessary for an input orientation. A DEA Model is output oriented if it seeks to increase outputs
without increasing inputs. Similarly, a DEA model is input oriented if it seeks to decrease inputs
without decreasing outputs. Our approach to the Network DEA Model is an extension of that used
in the two-stage DEA Model. In brief, we begin by solving a DEA problem for each Sub-DMU to
obtain its e(ciency score. Then we use the acyclic structure of the underlying graph to identify a
partial order of the Sub-DMUs based on the dependence of each Sub-DMU on the output of other
Sub-DMUs. Finally, we evaluate the e(ciency of the entire DMU by resolving the DEA problem
for each Sub-DMU in accordance with the partial order, assuming that all Sub-DMUs that precede
the Sub-DMU under analysis are e(cient.
Let k be the index of the DMU under analysis. For d = 1; : : : ; D, and s, t = 1; : : : ; S, s = t, we let
Xdsi = Level of input i consumed by Sub-DMU s in DMU d, for i = 1; : : : ; I ,
Ydstp = Level of intermediate product p produced by Sub-DMU s and consumed by Sub-DMU t in
DMU d, for p = 1; : : : ; P,
Zdsr = Level of output r produced by Sub-DMU s in DMU d for r = 1; : : : ; R,
dsk = Weight placed on Sub-DMU s in DMU d by Sub-DMU s in DMU k, and
sk = Inverse e(ciency of Sub-DMU s in DMU k.
For Sub-DMU s at DMU k, we solve
Max sk
s:t:
D

dsk Xdsi 6 Xksi ; i = 1; : : : ; I; (1)
d=1
S
D
S

dsk Ydtsp 6 Yktsp ; p = 1; : : : ; P; (2)
d=1 t=1 t=1
S
D
S

dsk Ydstp ¿ sk Ykstp ; p = 1; : : : ; P; (3)
d=1 t=1 t=1
D

dsk Zdsr ¿ sk Zksr ; r = 1; : : : ; R; (4)
d=1
dsk ¿ 0; d = 1; : : : ; D;
sk ¿ 0:
The optimal values of the weights, dsk ∗ , allow us to identify an e(cient hypothetical Sub-DMU that
serves as a reference point for Sub-DMU s at DMU k. This reference point is a linear combination
of e(cient Sub-DMUs in the sense that each of its inputs, intermediate products, and outputs is a
weighted sum of the corresponding
D quantities at the e(cient
D Sub-DMUs.
S For example, the reference
Sub-DMU consumes X of input i and ( t=1 dtsp )
Y of intermediate product
D d=1 dskdsi S
d=1 dsk
D
p, while producing d=1 dsk ( t=1 Ydstp ) of intermediate product p and d=1 dsk Zdsr of output
∗
r. We refer to the set of e(cient Sub-DMUs for which dsk ¿ 0 as the e;cient reference set for
Sub-DMU s at DMU k.
Inequalities (1) and (2) ensure that the reference Sub-DMU consumes no more of each input and
each intermediate product as does Sub-DMU s at DMU k. Inequalities (3) and (4) guarantee that
the reference Sub-DMU produces at least as much of each intermediate product and each output as
does Sub-DMU s at DMU k. In fact, the model selects the reference Sub-DMU that produces at
least sk times the levels of each intermediate product and output as does Sub-DMU k, where sk is
as large as possible. For example, if the maximal value of sk = 1:15, then the reference Sub-DMU
produces at least 15% more of each intermediate product and each output as does Sub-DMU k.
We refer to sk as the inverse e;ciency of Sub-DMU s at DMU k because of its analogy with the
de;nition of e(ciency that appears in the input-oriented model described below.
We de;ne
S
D
∗ ∗
Yksp = dsk Ydstp ; p = 1; : : : ; P
d=1 t=1
to be the level of intermediate product p produced by Sub-DMU s in DMU k if it were e(cient,
∗ is the optimal value of . In addition, we de;ne
where dsk dsk
D
∗ ∗
Zksr = dsk Zdsr ; r = 1; : : : ; R
d=1
to be the level of output r produced by Sub-DMU s in DMU k if it were e(cient.
To obtain DMU k’s organizational inverse e(ciency, k , we proceed as follows. Consider the
directed graph in which the nodes correspond to Sub-DMUs and the arcs correspond to Kows of
intermediate products from one Sub-DMU to another. Augment this graph by adding a source node
from which all inputs Kow and a sink node into which all outputs Kow. We assume that this graph
is acyclic.
Next, perform a depth-;rst search on the nodes of the directed acyclic graph and sequence the
Sub-DMUs in reverse order as reached by this search (see Skiena [6], Sedgewick [7], and Kruse
et al. [8]). Solve the model for each Sub-DMU in sequence using the levels of each intermediate
product that would arrive at the Sub-DMU if all previous Sub-DMUs were e(cient. We refer to
these optimal intermediate products as ∗ Yksp
∗ . The reference set for each Sub-DMU remains as it
was when the Sub-DMU model was solved the ;rst time. Let ∗ Zksr ∗ be the level of output r that
Sub-DMU s in DMU k would produce under these conditions if it were e(cient. 1 Then DMU k’s
organizational inverse e(ciency, k , is

S ∗Z ∗
ksr
k = min s=1
S
:
r=1;:::;R Z
s=1 ksr
We point out we may organize the Sub-DMUs in stages such that all the Sub-DMUs in a stage are
solved before any Sub-DMU in a subsequent stage is solved. This allows for a better understanding
of the Sub-DMU structure and faster computation if parallel processing is available. One way to
identify the stages is to apply the Critical Path Method (CPM) (see, for example, Wiest and Levy
[9]) treating each Sub-DMU as a task that requires one time unit and interpreting each Kow as a
precedence constraint. The earliest ;nish time of each task then represents its stage.
2.1. Model orientation
The formulation above corresponds to the output orientation because we applied the inverse
e(ciencies, sk and k , to the production levels associated with the corresponding Sub-DMUs. By
contrast, input oriented models apply the e(ciency scores, Esk , and Ek , to the consumption levels.
1
We will employ the convention of omitting pre-superscripts if the Sub-DMU producing the intermediate product or
output consumes only inputs and no intermediate products.
Thus, for Sub-DMU s in DMU k, the input oriented model is

Min Esk
s:t:
D

dsk Xdsi 6 Esk Xksi ; i = 1; : : : ; I;
d=1
S
D
S

dsk Ydtsp 6 Esk Yktsp ; p = 1; : : : ; P;
d=1 t=1 t=1
S
D
S

dsk Ydstp ¿ Ykstp ; p = 1; : : : ; P;
d=1 t=1 t=1
D

dsk Zdsr ¿ Zksr ; r = 1; : : : ; R;
d=1
dsk ¿ 0; d = 1; : : : ; D;
Esk ¿ 0:
The interpretations of the constraints in this model are parallel to those in the output-oriented model.
We refer to Esk as the e;ciency of Sub-DMU s at DMU k because it represents the ratio of the
lowest feasible level of each input or intermediate product at that Sub-DMU to its actual level.
In this case, we de;ne
S
D
∗ ∗
Yksp = dsk Ydtsp ; p = 1; : : : ; P
d=1 t=1
to be the level of intermediate product p consumed by Sub-DMU s in DMU k if it were e(cient.

In addition, we de;ne
D

∗ ∗
Xksi = dsk Xdsi ; i = 1; : : : ; I
d=1
to be the level of input i consumed by Sub-DMU s in DMU k if it were e(cient.

To obtain DMU k’s organizational e(ciency, Ek , we solve the Sub-DMU models in the order
found by the depth-;rst search using the levels of each intermediate product that would be required
at each subsequent Sub-DMU if all subsequent Sub-DMUs were e(cient. We refer to these optimal
intermediate products as ∗ Yksp
∗ . The reference set for each Sub-DMU remains as it was when the
Sub-DMU model was solved the ;rst time. Let ∗ Xksi ∗ be the level of input i that Sub-DMU s in
DMU k would consume under these conditions if it were e(cient. 2 Then DMU k’s organizational
2
We will employ the convention of omitting post-superscripts if the Sub-DMU consuming the intermediate product or
input produces only outputs and no intermediate products.
e(ciency, Ek , is

S ∗X ∗
ksi
Ek = max s=1
S
:
i=1;:::;I X
s=1 ksi
2.2. Returns to scale
Returns to scale for a producing unit refers to the rate at which its outputs increase as its inputs
increase, assuming that the unit is and remains e(cient. See Seiford and Thrall [10] for a detailed
discussion of this topic. If increasing all of the unit’s inputs by a certain constant proportion leads
to an increase in all of its outputs by the same proportion, regardless of the initial input levels,
then we say that the production process demonstrates constant returns to scale. If this leads to an
increase in all of its outputs by at least the same proportion, with one or more increases greater
than this proportion, then we say that the production process demonstrates nondecreasing returns
to scale. If this leads to an increase in all of its outputs by at most the same proportion, with one
or more increases less than this proportion, then we say that the production process demonstrates
nonincreasing returns to scale. In all other cases, we say that the production process demonstrates
variable returns to scale.
Returns to scale is an inherent characteristic of the production process, independent of the sources
of the inputs or the destinations of the outputs. Therefore, in a Network DEA Model, we examine
each Sub-DMU to determine its most appropriate returns to scale assumption without regard to other
Sub-DMUs.
Alternative assumptions concerning returns to scale require the inclusion of an appropriate
constraint:
D

dsk 6 1 Nonincreasing returns to scale;
d=1
D

dsk ¿ 1 Nondecreasing returns to scale;
d=1
D

dsk = 1 Variable returns to scale:
d=1
D
No such constraint is required for constant returns to scale. Intuitively, d=1 dsk represents the
“relative size” of the reference Sub-DMU for Sub-DMU s at DMU k. If we believe that the pro-
duction process at Sub-DMU s is nonincreasing (nondecreasing) returns to scale, then the reference
Sub-DMU must have the same or smaller (larger) relative size. If we believe that the production
process at Sub-DMU s is variable returns to scale, then the reference Sub-DMU must have the
same relative size. Under constant returns to scale, the reference Sub-DMU may be of any relative
size.
2.3. Reverse quantities
In some cases, we encounter natural measures of inputs, intermediate products, and outputs with
the property that larger numerical values represent lower levels of consumption or performance. We
refer to such measures as reverse quantities. Lewis and Sexton [11] show how to incorporate reverse
quantities into any DEA Model. The manner in which we incorporate a reverse quantity into a DEA
formulation depends on the DMU’s (or Sub-DMU’s) orientation and whether the reverse quantity is
consumed by or produced by that unit.
Consider ;rst an output-oriented unit. Suppose this unit consumes a reverse quantity. Then we
change the less-than-or-equal-to constraint corresponding to the reverse quantity to a greater-than-or-
equal-to constraint. Suppose this unit produces a reverse quantity. Then we change the greater-than-or-
equal-to constraint corresponding to the reverse quantity to a less-than-or-equal-to constraint. In
addition, we replace the inverse e(ciency variable (the -term) by its inverse, the e(ciency vari-
able (the E-term), that is E = 1=. Finally, if the unit produces both forward and reverse quantities,
so that the -term must remain in the model, then we add the quadratic constraint E = 1 to the for-
mulation. If all quantities produced are reverse, then we can eliminate the -term from the model by
changing the objective function to minimizing E, and there is no need to add the quadratic constraint.
Consider now an input-oriented unit. Suppose this unit produces a reverse quantity. Then we
change the greater-than-or-equal-to constraint corresponding to the reverse quantity to a less-than-or-
equal-to constraint. Suppose this unit consumes a reverse quantity. Then we change the less-than-or-
equal-to constraint corresponding to the reverse quantity to a greater-than-or-equal-to constraint. In
addition, we replace the e(ciency variable (the E-term) by its inverse, the inverse e(ciency variable
(the -term), that is =1=E. Finally, if the unit consumes both forward and reverse quantities, so that
the E-term must remain in the model, then we add the quadratic constraint E =1 to the formulation.
If all quantities consumed are reverse, then we can eliminate the E-term from the model by changing
the objective function to maximizing , and there is no need to add the quadratic constraint.
3. Network DEA theory
Unlike standard DEA, our Network DEA Model does not guarantee the existence of an orga-
nizationally e(cient DMU. It is possible that all DMUs under consideration are organizationally
ine(cient. Consider the output-oriented, constant returns to scale example shown in Fig. 2 and
Tables 1 and 2. The Network DEA Model computes the organizational inverse e(ciency for each
DMU to be 1.33. DMU A’s ine(ciency comes from the fact that it should have been able to
produce 10 rather than 5 units of intermediate product 1. DMU B’s ine(ciency comes from the
fact that it should have been able to produce 10 rather than 5 units of intermediate product 2. The
ine(ciencies in the Sub-DMUs propagate through the network and make the DMUs organizationally
ine(cient.
We present below a theorem that identi;es a necessary, but not su(cient, condition for a DMU
to be organizationally e(cient in our Network DEA Model. We de;ne an acyclic directed graph
G = (N; A) in which the node set, N , is the set of Sub-DMUs augmented by two nodes, V and W ,
which serve as origin and destination, respectively. The arc set, A, includes one node pair (s; t) for
each intermediate product produced by Sub-DMU s and consumed by Sub-DMU t. In addition, A
DMU
Sub
x1
DMU 1
y1
Sub
z1
DMU 3
y2
Sub
x2
DMU 2
Fig. 2. Sub-DMU structure for the example.
Table 1
Data for the example
DMU Inputs Intermediate products Output
x1 x2 y1 y2 z1
A 1 1 5 10 20
B 1 1 10 5 20
Table 2
Inverse e(ciencies in the example
DMU Inverse e(ciencies
Sub-DMU 1 Sub-DMU 2 Sub-DMU 3 DMU

A 2 1 1 1.33
B 1 2 1 1.33
includes one node pair (V; t) for each input consumed by Sub-DMU t and one node pair (s; W ) for
each output produced by Sub-DMU s.
Lemma 1. Assume an output oriented model. If Sub-DMU s at DMU k is ine;cient, then it can
produce more of each intermediate product and more of each output.
Proof. This follows directly from the observation that sk ¿ 1, which implies that Sub-DMU s at
DMU k can increase each intermediate product and each output that it produces by at least this
factor.
Lemma 2. Assume an output oriented model and either constant or nondecreasing returns to scale.
If Sub-DMU s at DMU k is e;cient and if all of its inputs and incoming intermediate products
increase, then the Sub-DMU can increase all of its outputs and outgoing intermediate products.
Proof. The fact that Sub-DMU s at DMU k is e(cient implies that ksk = 1; dsk = 0 for all d = k,
and sk = 1 is an optimal solution for Sub-DMU s at DMU k. Construct DMU k such that DMU
k is identical to DMU k except that the inputs and incoming intermediate products at Sub-DMU s
at DMU k have all been increased. Therefore, we seek to show that Sub-DMU s at DMU k can
increase all of its outputs and outgoing intermediate products. Observe that Sub-DMU s at DMU
k remains e(cient and dominates Sub-DMU s at DMU k . Therefore, any optimal solution for
Sub-DMU s at DMU k is feasible for Sub-DMU s at DMU k . The assumption of either constant or
nondecreasing returns to scale implies that we can increase ksk without reducing any of the dsk for
all d = k. Therefore, we can increase ksk until one or more of the less-than-or-equal-to constraints
become binding, and such increases will not violate any of the greater-than-or-equal-to constraints
in the model. The increased left-hand sides of the greater-than-or-equal-to constraints represent the
levels of intermediate products and outputs produced by the hypothetical reference Sub-DMU. Thus,
Sub-DMU s at DMU k can increase all of its outputs and outgoing intermediate products.
Theorem. Assume an output oriented model and either constant or nondecreasing returns to scale.
If DMU k is organizationally e;cient, then there exists a path from V to W along which every
Sub-DMU is e;cient.
Proof. The proof is by contradiction. Suppose that there is no path from V to W along which
every Sub-DMU is e(cient. We will show that every output Zksr can be increased. For each Zksr ,
observe that Sub-DMU s at DMU k is either e(cient or ine(cient. If it is ine(cient, then Lemma 1
guarantees that Zdsr can be increased. Suppose it is e(cient. Then Sub-DMU s at DMU k can receive
only intermediate products, for if it received an input, we would have discovered a path from V to
W along which every Sub-DMU is e(cient. Consider all the Sub-DMUs that provide intermediate
products to Sub-DMU s at DMU k. If they are all ine(cient, then Lemma 1 guarantees that all the
intermediate products entering Sub-DMU s at DMU k can be increased, implying (by Lemma 2)
that Zdsr can be increased. If any Sub-DMUs that provide intermediate products to Sub-DMU s
at DMU k are e(cient, then continue to trace Kows back toward node V in the same manner.
Eventually, all such paths must lead to ine(cient Sub-DMUs before reaching node V , or else there
would exist a path from V to W along which every Sub-DMU is e(cient. Thus, every output Zksr
can be increased, implying that DMU k is organizationally ine(cient, which is a contradiction.
While the theorem provides a necessary condition for a DMU to be organizationally e(cient,
the example above illustrates that the condition is not su(cient. In DMU A, Sub-DMUs 2 and 3
are both e(cient and form a path of e(cient Sub-DMUs from V to W . However, DMU A is not
organizationally e(cient.
4. Application to major league baseball
The following discussion of MLB follows that in Lewis and Sexton [11]. MLB is comprised of
30 teams divided into two leagues. The teams are the DMUs in our analysis. There are 16 teams in
the National League, and 14 in the American League. Each league is comprised of three divisions,
each containing between 4 and 6 teams. The leagues play under essentially identical rules with one
EG DMU d
TBG
POS$ Sub-DMU 1 Sub-DMU 3
WG
RG
Front Office ES On-Field Sub-DMU 5 GW
RS
TBS
PIT$ Sub-DMU 2 Sub-DMU 4
WS
Fig. 3. Network DEA Model for MLB.
major exception: the American League allows the use of a designated hitter who bats in place of
the pitcher. This potentially leads to generally greater oNensive production in the American League
because pitchers are commonly poor batters and designated hitters are often very good oNensively.
This leads to possible systematic league-based diNerences in e(ciency scores. We will return to this
issue later.
Each team’s objective is to win the World Series. Each team plays 162 regular season games, 144
within its own league and 18 with teams in the other league. Within each league, the ;rst-place teams
in the three divisions and the second-place team with the most wins qualify for post-season play.
Two short series of games within each league determine the league champions, who then compete
in the World Series. Our analysis will examine only the regular season, including the interleague
games but excluding post-season games.
4.1. Inputs, intermediate products, and output
In Sexton and Lewis [2], we modeled a MLB team as a two-stage acquisition and production
operation. In Stage 1 of that model, the team’s front o(ce uses resources (total player salaries, the
sole input) to acquire talent (oNensive and defensive production, the two intermediate products). In
Stage 2, the talent produces games won on the ;eld, the sole output.
In the Network DEA Model, we look deeper into both the front o(ce and on-;eld operations.
See Fig. 3. We model the front o(ce as composed of two Sub-DMUs, one of which consumes
player salaries to produce position player talent while the other consumes player salaries to produce
pitching talent. We model the on-;eld operation as composed of three Sub-DMUs, one of which
consumes oNensive contributions to score runs, another which consumes defensive contributions to
prevent runs by the other team, and a third which consumes runs gained and runs surrendered to
produce games won.
Sub-DMUs 1 and 2 in Fig. 3 constitute the front o(ce operation. Sub-DMU 1 spends money
on position player salaries (POS$). These players provide the team with oNensive production in
terms of total bases 3 gained (TBG) and walks gained (WG) while surrendering defensive errors
(ES). (We do not include stolen bases gained or extra bases gained by base runners as outputs of
Sub-DMU 1 because ;eld managers and base coaches directly inKuence these quantities. We chose
to restrict oNensive production to the ways in which batters reach base. Therefore, stolen bases and
extra bases gained by base runners contribute to the team’s e(ciency.) Sub-DMU 2 spends money
on pitcher salaries (PIT$). Pitchers provide the team with defensive production in terms of total
bases surrendered (TBS) and walks surrendered (WS).
Sub-DMUs 3, 4, and 5 in Fig. 3 constitute the on-;eld operation. Sub-DMU 3 converts TBG,
WG, and errors gained (EG) (committed by the team’s opponents) into runs gained (RG). A team
scores a run when one of its players successfully advances four bases. Sub-DMU 4 converts TBS,
WS, and ES into runs surrendered (RS). Finally, Sub-DMU 5 converts RG and RS into games won
(GW). A baseball team wins a game by scoring more runs than does their opponent after nine
innings of play. No game can end in a tie, so games that are tied after nine innings continue until
one team wins.
Note that TBS, WS, ES, and RS are reverse quantities.
4.2. Output orientation
We selected the output orientation for each MLB team and all of its sub-units because we felt
that the appropriate improvement for an ine(cient team would be to increase the number of games
it wins rather than decrease its total player salary. This orientation is consistent with each team’s
long-term goal of qualifying for post-season play.
The input orientation would imply that all teams seek to hold GW at current levels, an assumption
that, we believe, contradicts the fundamental competitive nature of baseball teams. We recognize that
individual teams may make economic decisions to spend less (or more) on player salaries. However,
we see this as a scale change, not evidence of an input orientation.
4.3. Returns to scale
We selected a variable returns to scale model for Sub-DMUs 1, 2, and 5, and an increasing returns
to scale model for Sub-DMUs 3 and 4. We present our rationale in the following sub-sections.
4.3.1. Sub-DMUs 1 and 2: The front o;ce

For Sub-DMUs 1 and 2, we considered the “threshold” nature in which player salaries result
in oNensive and defensive production. At very low levels of player salary, we would expect the
marginal return to be less than the average return. Low budget teams will tend to sign weaker
players and yet must conform to minimum salary levels set by the Major League Baseball Players
3
Total bases are de;ned by MLB as S+2D+3T+4HR, where S, D, T, and HR are the numbers of singles, doubles,
triples, and home runs, respectively.
Association contract with MLB. Below a certain threshold, therefore, we expect decreasing returns
to scale.
Eventually, as player salary increases beyond this threshold, the team is better able to sign superior
players who contribute signi;cantly on the ;eld. Here we expect increasing returns to scale.
At very high salary levels, we would again expect the marginal return to be less than the average
return. Superstar players who command the highest salaries are unlikely to provide oNensive and
defensive performance commensurate with their salaries. Above a second threshold, therefore, we
expect decreasing returns to scale.
4.3.2. Sub-DMUs 3 and 4: The oBense and defense

We selected an increasing returns to scale model for Sub-DMUs 3 and 4. For Sub-DMU 3, at low
levels of bases gained, we expect the marginal contribution of additional bases gained to scoring
runs to be small because teams usually score runs when they gain bases in clusters. As bases gained
increases, clusters become more common and the team scores more runs. Because the team can
score runs without limit, we expect increasing returns to scale at all levels of bases gained.
For Sub-DMU 4, the logic remains the same as for Sub-DMU 3 except that we must recall
that all the inputs and outputs associated with Sub-DMU 4 are reverse quantities. At low levels of
bases surrendered, we expect the marginal contribution of additional bases surrendered to allowing
runs to be small, again because teams usually score runs when they gain bases in clusters. As
bases surrendered increases, clusters become more common and the team allows more runs. Because
opposing teams can score runs without limit, we expect increasing returns to scale at all levels of
bases surrendered.
4.3.3. Sub-DMU 5: Winning games

We selected a variable returns to scale model for Sub-DMU 5 because of the “threshold” nature
in which runs gained and surrendered combine to win games. At very low levels of RG and RS,
we would expect the marginal return to be less than the average return. Weak teams are likely to
lose many games by several runs and therefore experience only a small increase in games won for a
given increase in runs gained or decrease in runs surrendered. Below a certain threshold, therefore,
we expect decreasing returns to scale.
Eventually, as performance increases beyond this threshold, the average margin of loss diminishes
and the marginal return increases as the team begins to win some close games that they would
otherwise have lost. Here we expect increasing returns to scale.
At very high levels of RG and RS, we would again expect the marginal return to be less than
the average return. Strong teams are likely to win many games by several runs and would therefore
experience only a small increase in games won for a given increase in runs gained or decrease
in runs surrendered. Above a second threshold, therefore, we expect decreasing returns to scale. In
addition, the limit on the number of games that a team can win—it cannot win more games than it
plays—must lead eventually to decreasing returns to scale.
4.4. Network DEA Model for major league baseball
Based on the discussions and assumptions described above, we employ the following Network
DEA Model formulation for MLB. We begin by solving two DEA models for the front o(ce
of team k. The ;rst corresponds to Sub-DMU 1. Note that Sub-DMU 1 has an output orientation,
variable returns to scale, consumes one forward input (POS$), and produces two forward intermediate
products (TBG and WG) and one reverse intermediate product (ES). Therefore, we require the
quadratic constraint. The formulation is
Max 1k
s:t:
D

d1k (POS$)d 6 (POS$)k ;
d=1
D

d1k (TBG)d ¿ 1k (TBG)k ;
d=1
D

d1k (WG)d ¿ 1k (WG)k ;
d=1
D

d1k (ES)d 6 E1k (ES)k ;
d=1
1k E1k = 1;
D

d1k = 1;
d=1
d1k ¿ 0; d = 1; : : : ; D;
1k ; E1k ¿ 0:
The second corresponds to Sub-DMU 2. Note that Sub-DMU 2 has an output orientation, variable
returns to scale, consumes one forward input (PIT$), and produces two reverse intermediate products
(TBS and WS). Thus, we do not require a quadratic constraint. The formulation is
Min E2k
s:t:
D

d2k (PIT $)d 6 (PIT $)k ;
d=1
D

d2k (TBS)d 6 E2k (TBS)k ;
d=1
D

d2k (WS)d 6 E2k (WS)k ;
d=1
D

d2k = 1;
d=1
d2k ¿ 0; d = 1; : : : ; D;
E2k ¿ 0:
We next turn our attention to the on-;eld operations by solving the models for Sub-DMUs 3 and
4. Sub-DMU 3 has an output orientation, increasing returns to scale, consumes one forward input
(EG) and two forward intermediate products (TBG and WG), and produces one forward intermediate
product (RG). We do not require a quadratic constraint. The formulation is
Max 3k
s:t:
D

d3k (EG)d 6 (EG)k ;
d=1
D

d3k (TBG)d 6 (TBG)k ;
d=1
D

d3k (WG)d 6 (WG)k ;
d=1
D

d3k (RG)d ¿ 3k (RG)k ;
d=1
D

d3k ¿ 1;
d=1
d3k ¿ 0; d = 1; : : : ; D;
3k ¿ 0:
Sub-DMU 4 has an output orientation, increasing returns to scale, consumes three reverse inter-
mediate products (ES, TBS and WS), and produces one reverse intermediate product (RS). We do
not require a quadratic constraint. The formulation is
Min E4k
s:t:
D

d4k (ES)d ¿ (ES)k ;
d=1
D

d4k (TBS)d ¿ (TBS)k ;
d=1
D

d4k (WS)d ¿ (WS)k ;
d=1
D

d4k (RS)d 6 E4k (RS)k ;
d=1
D

d4k ¿ 1;
d=1
d4k ¿ 0; d = 1; : : : ; D;
E4k ¿ 0:
We complete the analysis of the on-;eld operations by solving the model for Sub-DMU 5.
Sub-DMU 5 has an output orientation, variable returns to scale, consumes one forward interme-
diate product (RG) and one reverse intermediate product (RS), and produces one forward output
(GW). We do not require a quadratic constraint. The formulation is
Max 5k
s:t:
D

d5k (RG)d 6 (RG)k ;
d=1
D

d5k (RS)d ¿ (RS)k ;
d=1
D

d5k (GW )d ¿ 5k (GW )k ;
d=1
D

d5k = 1;
d=1
d5k ¿ 0; d = 1; : : : ; D;
5k ¿ 0:
Next, we compute the organizational inverse e(ciency of DMU k. We begin by constructing the
directed acyclic graph shown in the top portion of Fig. 4. The lower portion of Fig. 4 shows one
possible sequence of Sub-DMUs generated by a depth-;rst search. Other sequences are possible.
Fig. 5 illustrates how the Sub-DMUs may be grouped into stages using CPM.
We proceed through the sequence of Sub-DMUs shown in Fig. 4, or equivalently through the
stages shown in Fig. 5, resolving the model for each Sub-DMU using the levels of intermediate
products that the Sub-DMU would have received had all previous Sub-DMUs been e(cient. We note
that there is no need to resolve for the Sub-DMUs in Stage 1 since they consume no intermediate
products.
TBG
Sub-DMU 1 Sub-DMU 3
WG
POS$ RG
EG
Source ES Sub-DMU 5 GW Sink
PIT$ RS
TBS
Sub-DMU 2 Sub-DMU 4
WS
EG
WG
POS$ TBG
Source PIT$ Sub-DMU 2 Sub-DMU 1 ES Sub-DMU 4 Sub-DMU 3 RG Sub-DMU 5 GW Sink
TBS RS
WS
Fig. 4. Directed acyclic graph for MLB Network DEA Model (top). One possible sequence of Sub-DMUs generated by
a depth-;rst search of the directed acyclic graph (bottom).
EG
DMU d
Sub- 0 1 Sub- 1 2
DMU 1 TBG DMU 3
POS$
WG
1 0 1 1 1 2
RG
Sub- 2 3
DMU 5
Stage 1 ES Stage 2 GW
1 2 3
RS
Sub- Sub- 1 2 Stage 3
0 1 TBS DMU 4
DMU 2
PIT$
WS 1 1 2
1 0 1
Fig. 5. Grouping of Sub-DMUs in the MLB Network DEA Model into stages using CPM.
Thus, we resolve the models for Sub-DMUs 3 and 4 using the levels of TBG, WG, ES, TBS, and
WS that Sub-DMUs 1 and 2 would have produced had they been e(cient. These are the left-hand
sides of the corresponding constraints in the models for Sub-DMUs 1 and 2 at optimality, and we
denote these values with superscript asterisks. Hence, we solve

Max 3k
s:t:
D

d3k (EG)d 6 (EG)k ;
d=1
D

d3k (TBG)d 6 (TBG)∗k ;
d=1
D

d3k (WG)d 6 (WG)∗k ;
d=1
D

d3k (RG)d ¿ 3k (RG)k ;
d=1
D

d3k ¿ 1;
d=1
d3k ¿ 0; d = 1; : : : ; D;
3k ¿ 0:
and
Min E4k
s:t:
D

d4k (ES)d ¿ (ES)∗k ;
d=1
D

d4k (TBS)d ¿ (TBS)∗k ;
d=1
D

d4k (WS)d ¿ (WS)∗k ;
d=1
D
d4k (RS)d 6 E4k (RS)k ;
d=1
D
d4k ¿ 1;
d=1
d4k ¿ 0; d = 1; : : : ; D;
E4k ¿ 0:
Finally, we resolve the model for Sub-DMU 5 using the levels of RG and RS that Sub-DMUs 3
and 4 would have produced had Sub-DMUs 1– 4 been e(cient. These are the left-hand sides of the
corresponding constraints in the most recently stated models for Sub-DMUs 3 and 4 at optimality.
We denote these values with both pre- and post-superscript asterisks. Hence, we solve
Max 5k
s:t:
D

d5k (RG)d 6∗ (RG)∗k ;
d=1
D

d5k (RS)d ¿∗ (RS)∗k ;
d=1
D

d5k (GW )d ¿ 5k (GW )k ;
d=1
D

d5k = 1;
d=1
d5k ¿ 0; d = 1; : : : ; D;
5k ¿ 0:
The organizational inverse e(ciency of DMU k is
∗ (GW )∗
k
k = ;
(GW )k
where the numerator is the value of the left-hand side of the GW constraint in this last model at
optimality.
4.5. Site characteristics for major league baseball
We identify one site characteristic, the availability of the designated hitter (DH), which has the
potential to aNect e(ciency in both Front O(ce Sub-DMUs and yet is beyond the control of team
management. Relative to National League teams, American League teams may be more interested
in signing a player with signi;cant oNensive abilities even if he is poor defensively. Such a player
can serve as DH on an American League team but not on a National League team because every
hitter in the National League must also play the ;eld. Conversely, pitchers may prefer to pitch in
the National League where they do not face the DH. Therefore, the front o(ces of MLB teams in
diNerent leagues face diNerent circumstances and, consequently, may have systematically diNerent
e(ciencies.
We do not believe, however, that league a(liation aNects the On-Field Sub-DMUs. Consider
Sub-DMU 3, for example. Suppose that two teams, one in each league, consume identical levels of
TBG, WG, and EG. Given that teams score runs according to the same processes in both leagues, we
see no reason why these teams should score diNerent numbers of runs. A similar argument applies to
Sub-DMU 4. Consider Sub-DMU 5, and again suppose that two teams, one in each league, consume
identical levels of RG and RS. Again, we see no reason to expect either team to win more games.
We also considered the size of the market in which the team plays as a potential site characteristic
because we recognize that market size can have a major impact on the team’s ability to pay player
salaries. However, we argue that, while beyond the control of management (at least in the short
term—teams can and do relocate), market size is not a site characteristic. We believe that a team’s
ability to pay player salaries aNects the team’s scale of operations, but not its ability to be e(cient. By
imposing variable returns to scale in Sub-DMUs 1 and 2, we believe that market size is inappropriate
as a site characteristic.
Finally, we considered ballpark features as site characteristics. For example, the Colorado Rockies
play at Coors Field, which is over 5000 ft above sea level. This presents signi;cant problems to
pitchers trying to throw pitches that curve and allows batters to hit the ball further than they would
otherwise at or near sea level. As a result, games played at Coors Field tend to be high scoring.
We believe that every team selects players who are likely to perform well at the team’s home ;eld,
where the team plays half of its games. Thus, the front o(ce’s ability to sign players who ;t well
with the idiosyncratic features of team’s ballpark is a component of the e(ciency of the front o(ce.
Therefore, we did not attempt to adjust inverse e(ciency scores for ballpark characteristics.
5. Computational results
We applied the model described above to evaluate the performance of MLB teams during the 1999
season. We obtained data (see Table 3) from a variety of sources. See Appendix A for complete
team names. We extracted player salary data from the USA Today web site [12]. We gathered
games won and the team performance data from the Baseball Archive Database [13]. We obtained
population data for the markets in which teams play from the US Census Bureau web site [14].
Table 4 shows the organizational inverse e(ciency scores for each MLB team in the 1999 season
along with the Sub-DMU inverse e(ciencies from the Network DEA Model. See Figs. 6 and 7 for
histograms of these results, and see Appendix B for detailed results for each team.
We mentioned earlier that the use of the designated hitter in the American League but not the
National League might lead to systematic diNerences in inverse e(ciency scores between the leagues.
We postulate that such eNects might occur in Sub-DMUs 1 and 2, and consequently in the overall
organization. We tested for diNerences in inverse e(ciency in Sub-DMUs 1 and 2 and in the overall
organization using the Wilcoxon Rank Sum test. The P-values were 0.3221 for Sub-DMU 1, 0.2183
for Sub-DMU 2, and 0.7083 for the overall organization. Thus, we found no evidence of systematic
diNerences in inverse e(ciency scores between the two leagues. Had we discovered such diNerences,
we would have applied an adjustment procedure similar to those described in Sexton and Silkman
[15], Norton et al. [16] or Fried et al. [17].
Table 5 repeats the organizational inverse e(ciencies shown in Table 4 supplemented with the
optimal weights placed on each e(cient organization. Note that several teams place positive weight
on CLE and SD even though these teams are not organizationally e(cient. This occurs because we
compute organizational e(ciency relative to the Sub-DMU 5 reference set so that teams that are
e(cient in Sub-DMU 5 may appear in the e(cient reference set of another team at the organizational
level. Tables 6–10 show comparable information for Sub-DMUs 1–5, respectively.
Table 3
Data for the 1999 Major League Baseball season. See Appendix A for complete team names
ANA A $26,675,166 $25,155,000 114 2170 511 106 2338 624 711 826 70 15,781,273
ARZ N $32,359,000 $33,719,999 121 2595 588 104 2238 543 908 676 100 2,931,004
ATL N $39,982,500 $33,602,500 120 2427 608 111 2100 507 840 661 103 3,746,059
BAL A $48,499,139 $30,003,143 116 2522 615 89 2399 647 851 815 78 7,285,206
BOS A $29,817,500 $29,736,000 113 2497 597 127 2199 469 836 718 94 5,633,060
CHC N $37,805,500 $22,386,000 118 2303 571 139 2641 529 747 920 67 8,809,846
CHW A $13,860,000 $10,700,000 112 2421 499 136 2550 596 777 870 75 8,809,846
CIN N $23,213,761 $9,949,000 121 2549 569 105 2227 636 865 711 96 1,948,264
CLE A $46,285,461 $21,776,166 114 2629 743 106 2453 634 1009 860 97 2,911,683
COL N $32,729,190 $23,135,647 120 2696 508 118 2819 737 906 1028 72 2,365,345
DET A $22,098,000 $12,006,666 114 2426 458 106 2494 583 747 882 69 5,457,583
FLA N $7,510,000 $11,366,000 119 2203 479 127 2443 655 691 852 64 3,655,844
HOU N $35,732,500 $15,896,500 121 2306 728 106 2210 478 823 675 97 4,407,579
KC A $11,060,000 $12,646,000 113 2435 535 125 2533 643 856 921 64 1,737,025
LA N $44,651,667 $34,614,286 119 2340 594 137 2341 594 793 787 77 15,781,273
MIL N $26,814,595 $14,581,167 119 2378 658 127 2604 616 815 886 74 1,645,924
MIN A $9,002,500 $10,240,000 115 2110 500 92 2607 487 686 845 63 2,831,234
MON N $9,375,500 $6,800,000 117 2376 438 160 2328 572 718 853 68 3,326,510
NYM N $36,367,928 $26,082,499 123 2421 717 68 2281 617 853 711 97 20,126,150
NYY A $48,351,026 $36,683,666 114 2521 718 111 2204 581 900 731 98 20,126,150
OAK A $8,867,833 $14,366,500 113 2462 770 122 2406 569 893 846 87 6,816,047
PHI N $16,586,666 $13,710,834 121 2412 631 100 2483 627 841 846 77 5,988,348
PIT N $13,376,666 $8,821,000 118 2292 573 147 2303 633 775 782 78 2,346,153
SD N $21,964,680 $25,863,666 119 2119 631 129 2344 529 710 781 74 2,780,592
SF N $30,009,057 $14,934,500 121 2414 696 105 2376 655 872 831 86 6,816,047
SEA A $33,629,836 $16,333,667 114 2536 610 113 2556 684 859 905 79 3,424,361
STL N $25,563,333 $20,135,000 119 2371 613 132 2376 667 809 838 75 2,563,801
TB A $20,092,500 $13,860,000 112 2296 544 135 2508 695 772 913 69 2,256,559
TEX A $48,874,931 $25,960,000 113 2705 611 119 2606 509 945 859 95 4,802,463
TOR A $20,710,333 $23,799,000 114 2581 578 106 2546 575 883 862 84 4,263,757
A = American League, N = National League, POS$ = Position Player Salary, PIT$ = Pitcher Salary, EG = Errors Gained,
TBG = Total Bases Gained, WG = Walks Gained, ES = Errors Surrendered, TBS = Total Bases Surrendered, WS = Walks
Surrendered, RG = Runs Gained, RS = Runs Surrendered, and GW = Games Won.
5.1. The network versus the two-stage and one-stage DEA Models
Table 11 shows the inverse e(ciencies computed using the Network DEA Model, the Two-Stage
DEA Model presented in Sexton and Lewis [2], and the One-Stage DEA Model. The Two-Stage
DEA Model has total player salary as the input to the ;rst stage, total bases gained and total bases
surrendered as intermediate products Kowing from the ;rst stage to the second stage, and Games
Won as the output from the second stage. In the Two-Stage DEA Model, total player salary is the
sum of position player salary and pitcher salary. In addition, total bases gained included walks gained
and errors gained, while total bases surrendered included walks surrendered and errors surrendered.
The One-Stage DEA Model has total player salary as the input and games won as the output.
Table 4
Inverse e(ciency scores for each MLB team in the 1999 season. The table shows the organizational inverse e(ciencies
along with the inverse e(ciencies for each Sub-DMU
Team Organization Sub-DMU 1 Sub-DMU 2 Sub-DMU 3 Sub-DMU 4 Sub-DMU 5
ANA 1.4637 1.1603 1.0898 1 1.1337 1

ARZ 1.0300 1.0044 1.0657 1.0154 1 1.0255
ATL 1 1.0769 1 1.0383 1 1
BAL 1.3176 1.0053 1.1320 1.0786 1.0888 1.1403
BOS 1.0857 1.0501 1 1.0618 1.0021 1.0309
CHC 1.5265 1.1465 1.1166 1.0720 1.1083 1
CHW 1.1859 1.0377 1.1199 1 1.0802 1.0038
CIN 1.0572 1.0114 1 1.0417 1 1.0501
CLE 1.0555 1 1.1331 1 1.1380 1
COL 1.4144 1 1.3074 1 1.1796 1
DET 1.4840 1.0493 1.1060 1 1.1708 1.0195
FLA 1.0702 1 1.0984 1.0101 1.0908 1
HOU 1.0581 1.0317 1 1 1.0013 1.0228
KC 1.5885 1.0201 1.1411 1 1.1710 1.2275
LA 1.3377 1.1356 1.1148 1.0408 1.0263 1.1070
MIL 1.3786 1.0793 1.1769 1.0522 1.1096 1.0528
MIN 1 1 1 1 1.0731 1
MON 1.4841 1.0383 1 1 1.0022 1.0083
NYM 1.0569 1 1.0657 1.0413 1 1.0256
NYY 1.0510 1.0374 1.0495 1.0443 1.0475 1.0295
OAK 1.1676 1 1.0868 1 1.1325 1.0405
PHI 1.3295 1 1.1217 1.0358 1.1153 1.1008
PIT 1.2964 1.0939 1.0176 1.0270 1 1.0657
SD 1.3879 1.1797 1.0838 1 1.0423 1
SF 1.1841 1.0439 1.0798 1.0126 1.1102 1.0428
SEA 1.2903 1.0352 1.1648 1.0691 1.1355 1.0211
STL 1.3553 1.0896 1.0938 1.0456 1.0690 1.0934
TB 1.2891 1.1210 1.1367 1 1.1173 1.0211
TEX 1.0722 1 1.0796 1 1.0913 1
TOR 1.2236 1 1.1758 1.0284 1.1209 1.0456
Averages 1.2414 1.0483 1.0919 1.0238 1.0786 1.0392
We observe that the mean organizational inverse e(ciency scores rise from 1.1943 for the
One-Stage DEA Model to 1.2102 for the Two-Stage DEA Model and to 1.2414 for the Network DEA
Model. The respective (population) standard deviations 4 are 0.1527, 0.1548, and 0.1742, yielding
coe(cients of variation of 12.8%, 12.8%, and 14.0%. Thus, organizational inverse e(ciencies tend
to rise and to become slightly more spread with increasing model complexity. This suggests that the
more complex models are more capable of identifying sources of ine(ciency, thereby potentially
yielding greater managerial insights into organizational improvements.
4
We use the population standard deviation rather than the sample version because we have included the entire population
of 30 teams.
Fig. 6. Histogram of MLB organizational inverse e(ciencies from the Network DEA Model.
We see that in most cases (21 of 30, 70%), the organizational inverse e(ciency scores computed
using the One- and Two-Stage DEA Models diNer by less than 0.05 in absolute value, suggesting that
the two models provide reasonably similar results in these cases. In 7 of the 30 cases (23.3%), the
inverse e(ciency produced by the Two-Stage DEA Model exceeds that produced by the One-Stage
DEA Model by more than 0.05. Conversely, in 2 of the 30 cases (6.7%), the inverse e(ciency
produced by the One-Stage DEA Model exceeds that produced by the Two-Stage DEA Model by
more than 0.05. If we accept diNerences of 0.05 or greater as potentially meaningful, then the two
models produce such diNerences in 30% of the cases. We elaborate on these diNerences in Sexton
and Lewis [2].
By contrast, we ;nd considerably larger diNerences between the organizational inverse e(ciencies
computed using the Network DEA Model and those computed using the Two-Stage DEA Model.
We see that the absolute diNerence is less than 0.05 in only 13 of the 30 cases (43.3%). In only
four cases (13.3%) does the Network DEA Model produce a lower organizational inverse e(ciency
score. However, all these (absolute) diNerences are greater than 0.05. In particular, we note that
the Network DEA Model’s organizational inverse e(ciency for MIN is lower by more than 0.27,
that for FLA is lower by more than 0.19, and that for TB is lower by more than 0.13. In 13 cases
(43.3%), the Network DEA Model produced an organizational inverse e(ciency score that was at
least 0.05 higher than that produced by the Two-Stage DEA Model. In particular, we note that the
Network DEA Model’s organizational inverse e(ciency for MON is higher by more than 0.33, and
that for PIT is higher by more than 0.20.
We observe that only one team, ATL, is e(cient regardless of model, and that only 12 teams
(40%), including ATL, had all three organizational inverse e(ciencies within 0.05 of one another.
This indicates that the model complexity is an important consideration in evaluating organizational
e(ciency.
Fig. 7. Histograms of MLB Sub-DMU inverse e(ciencies from the Network DEA Model.
Consider the case of the Minnesota Twins (MIN). The One- and Two-Stage DEA Models evaluate
the organizational inverse e(ciency of MIN as 1.2104 and 1.2749, respectively, worse than average in
both cases. However, the Network DEA Model identi;es MIN as e(cient, running counter to the gen-
eral pattern cited above in which organizational inverse e(ciency increases with model complexity.
This suggests that the richer detail of the Network DEA Model allows a more comprehensive analysis
that reveals MIN’s e(ciency more accurately.
Table 5
Organizational inverse e(ciencies for each MLB team in the 1999 season and the optimal reference set weights
Team Inverse e(ciency Reference set weights
ATL CLE MIN SD
ANA 1.4637 0.9103 0.0897 0 0

ARZ 1.0300 1 0 0 0
ATL 1 1 0 0 0
BAL 1.3176 0.9618 0.0382 0 0
BOS 1.0857 0.8428 0.1572 0 0
CHC 1.5265 0.8794 0.1206 0 0
CHW 1.1859 0.5154 0 0 0.4846
CIN 1.0572 0.7487 0.2513 0 0
CLE 1.0555 0.8970 0.1030 0 0
COL 1.4144 0.8060 0.1940 0 0
DET 1.4840 0.8990 0.1010 0 0
FLA 1.0702 0 0 0.5005 0.4995
HOU 1.0581 0.9399 0.0601 0 0
KC 1.5885 0.7774 0.2226 0 0
LA 1.3377 1 0 0 0
MIL 1.3786 0.8364 0.1636 0 0
MIN 1 0 0 1 0
MON 1.4841 0.6527 0.3473 0 0
NYM 1.0569 0.9201 0.0799 0 0
NYY 1.0510 1 0 0 0
OAK 1.1676 0.7634 0.2366 0 0
PHI 1.3295 0.8956 0.1044 0 0
PIT 1.2964 0.6863 0.3137 0 0
SD 1.3879 0.9503 0.0497 0 0
SF 1.1841 0.8058 0.1942 0 0
SEA 1.2903 0.8220 0.1780 0 0
STL 1.3553 0.7741 0.2259 0 0
TB 1.2891 0.5154 0 0 0.4846
TEX 1.0722 0.8090 0.1910 0 0
TOR 1.2236 0.9643 0.0357 0 0
Consider next the cases of the Montreal Expos (MON) and the Oakland Athletics (OAK). Both
were on the e(cient frontier in the One-Stage DEA Model. The Two-Stage DEA Model found some
ine(ciency, producing organizational inverse e(ciency scores of 1.1536 and 1.1105, respectively.
The Network DEA Model revealed more ine(ciency, elevating MON to 1.4841 and OAK to 1.1676.
Thus, the richer detail provided by the Two-Stage and Network DEA Models reveals that neither
team is e(cient and that MON in particular is highly ine(cient.
5.2. Management insights from Sub-DMU analysis
In this section, we refer the reader to Appendix B. We observe that the Atlanta Braves (ATL) and
the Minnesota Twins (MIN) are organizationally e(cient in the Network DEA Model. However, ATL
Table 6
Sub-DMU 1 inverse e(ciencies for each MLB team in the 1999 season and the optimal weights placed on each e(cient
Sub-DMU 1
Team Inverse Reference set weights

e(ciency
CLE COL FLA MIN NYM OAK PHI TEX TOR
ANA 1.1603 0 0 0 0 0.38371 0 0.01047 0 0.60582

ARZ 1.0044 0.09771 0.47984 0 0 0.2160 0 0 0 0.20641
ATL 1.0769 0.43165 0.32988 0 0 0.19578 0 0 0.0427 0
BAL 1.0053 0 0 0 0 0.59741 0 0 0.40259 0
BOS 1.0501 0.22653 0.52275 0 0 0 0.25072 0 0 0
CHC 1.1465 0.52725 0.3860 0 0 0 0.0868 0 0 0
CHW 1.0377 0 0 0 0 0 0.57845 0 0 0.42155
CIN 1.0114 0 0.09467 0 0 0.08722 0 0 0 0.81811
CLE 1 1 0 0 0 0 0 0 0 0
COL 1 0 1 0 0 0 0 0 0 0
DET 1.0493 0 0 0 0 0.11513 0 0.10065 0 0.78422
FLA 1 0 0 1 0 0 0 0 0 0
HOU 1.0317 0 0 0 0 0.35666 0.64334 0 0 0
KC 1.0201 0 0 0 0 0 0.81489 0 0 0.18511
LA 1.1356 0.60914 0.16388 0 0 0 0 0 0.2270 0
MIL 1.0793 0.35749 0.19154 0 0 0 0.4510 0 0 0
MIN 1 0 0 0 1 0 0 0 0 0
MON 1.0383 0 0 0 0 0 0.95713 0 0 0.04287
NYM 1 0 0 0 0 1 0 0 0 0
NYY 1.0374 0.91979 0 0 0 0.00535 0.07485 0 0 0
OAK 1 0 0 0 0 0 1 0 0 0
PHI 1 0 0 0 0 0 0 1 0 0
PIT 1.0939 0 0 0 0 0 0.61927 0 0 0.38073
SD 1.1797 0.21971 0 0 0 0.1511 0.56834 0 0 0.06085
SF 1.0439 0.33639 0 0 0 0.26549 0.29229 0 0 0.10582
SEA 1.0352 0.40251 0.23733 0 0 0 0.01919 0 0 0.3410
STL 1.0896 0.21163 0.36782 0 0 0 0.42055 0 0 0
TB 1.1210 0 0.17459 0 0 0 0.22936 0 0 0.5960
TEX 1 0 0 0 0 0 0 0 1 0
TOR 1 0 0 0 0 0 0 0 0 1
has inverse e(ciency scores of 1.0769 and 1.0383 in Sub-DMUs 1 and 3, respectively. This suggests
that ATL could improve the on-;eld production of the position players it acquires in the front o(ce,
and that the on-;eld operation could gain more runs based on the oNensive performance of its
players. Similarly, MIN has an inverse e(ciency score of 1.0731 in Sub-DMU 4, suggesting that
its on-;eld operation could surrender fewer runs based on the defensive performance of its players.
Therefore, the Network DEA Model may permit an e(cient team to ;nd areas of improvement.
Consider again the Montreal Expos (MON). Their organizational inverse e(ciency is 1.4841,
indicating that the team could have won many more games than it did based on its inputs. How-
ever, the Sub-DMU inverse e(ciency scores, 1.0383, 1, 1, 1.0022, and 1.0083 for Sub-DMUs 1–5,
respectively, shed little light on how MON might improve. A closer examination of the Kows of the
Table 7
Sub-DMU 2
ATL BOS CIN HOU MIN MON
ANA 1.0898 0.6429 0 0.3571 0 0 0

ARZ 1.0657 1 0 0 0 0 0
ATL 1 1 0 0 0 0 0
BAL 1.1320 0.8478 0 0.1522 0 0 0
BOS 1 0 1 0 0 0 0
CHC 1.1166 0 0.4689 0 0.5311 0 0
CHW 1.1199 0 0 0.0053 0.4269 0 0.5678
CIN 1 0 0 1 0 0 0
CLE 1.1331 0.4761 0 0.4287 0.0952 0 0
COL 1.3074 0.5568 0 0.4404 0.0028 0 0
DET 1.1060 0 0 0.0923 0.5404 0 0.3673
FLA 1.0984 0 0 0.7408 0.2455 0 0.0137
HOU 1 0 0 0 1 0 0
KC 1.1411 0 0 0.5377 0.4565 0 0.0058
LA 1.1148 1 0 0 0 0 0
MIL 1.1769 0.0209 0 0.2834 0.6956 0 0
MIN 1 0 0 0 0 1 0
MON 1 0 0 0 0 0 1
NYM 1.0657 0.6821 0 0.3179 0 0 0
NYY 1.0495 1 0 0 0 0 0
OAK 1.0868 0.0098 0 0.2865 0.7037 0 0
PHI 1.1217 0.0458 0 0.5039 0.4502 0 0
PIT 1.0176 0 0 0.6418 0 0 0.3582
SD 1.0838 0.4094 0.1964 0 0.3942 0 0
SF 1.0798 0.2064 0 0.7762 0.0175 0 0
SEA 1.1648 0.2420 0 0.6469 0.1111 0 0
STL 1.0938 0.4306 0 0.5694 0 0 0
TB 1.1367 0.1588 0 0.8153 0.0259 0 0
TEX 1.0796 0 0.7272 0 0.2728 0 0
TOR 1.1758 0.3994 0.06 0 0.5406 0 0
intermediate products reveals MON’s areas of improvement. We see that Sub-DMU 1 produced 2376
TBG, 438 WG, and 160 ES. The reference Sub-DMU 1 for MON produced 2467 TBG, 762 WG,
and 121 ES. The factor inverse e(ciency scores are 1.0383, 1.7392, and 1.3189, respectively, the
minimum of which is the Sub-DMU 1 inverse e(ciency. Therefore, Sub-DMU 1 at MON could have
gained almost 74% more walks than it did, and it surrendered almost 32% more errors than did its
reference Sub-DMU. This poor performance propagated through the organization causing Sub-DMU
3 to gain only 718 runs, rather than 915, and Sub-DMU 4 to surrender 853 runs rather than 730.
Had they gained 915 runs and surrendered 730, they could have won 101 games, rather than 68.
The Houston Astros (HOU) provide an interesting parallel with MON. The two teams have nearly
identical Sub-DMU inverse e(ciency scores. For HOU, they are 1.0317, 1, 1, 1.0013, and 1.0228
Table 8
Sub-DMU 3
e(ciency
ANA CHW CLE COL DET HOU KC MIN MON OAK SD TB TEX
ANA 1 1 0 0 0 0 0 0 0 0 0 0 0 0
ARZ 1.0154 0 0 0.3050 0.38635 0 0 0.30869 0 0 0 0 0 0
ATL 1.0383 0 0 0.39475 0 0 0 0.3450 0.26025 0 0 0 0 0
BAL 1.0786 0 0 0.39023 0.04328 0 0 0.56649 0 0 0 0 0 0
BOS 1.0618 0 0 0.22106 0 0 0 0.37328 0 0 0 0 0.22106 0.1846
CHC 1.0720 0 0 0.26838 0 0 0 0.16527 0.56635 0 0 0 0 0
CHW 1 0 1 0 0 0 0 0 0 0 0 0 0 0
CIN 1.0417 0 0 0.20079 0.28754 0 0 0.51168 0 0 0 0 0 0
CLE 1 0 0 1 0 0 0 0 0 0 0 0 0 0
COL 1 0 0 0 1 0 0 0 0 0 0 0 0 0
DET 1 0 0 0 0 1 0 0 0 0 0 0 0 0
FLA 1.0101 0 0 0 0 0 0 0.00611 0.65173 0.34216 0 0 0 0
HOU 1 0 0 0 0 0 1 0 0 0 0 0 0 0
KC 1 0 0 0 0 0 0 1 0 0 0 0 0 0
LA 1.0408 0 0 0.3700 0 0 0 0.11682 0.51317 0 0 0 0 0
MIL 1.0522 0 0 0.51193 0 0 0 0 0.23157 0 0 0.2565 0 0
MIN 1 0 0 0 0 0 0 0 1 0 0 0 0 0
MON 1 0 0 0 0 0 0 0 0 1 0 0 0 0
NYM 1.0413 0 0 0.46316 0 0 0.35182 0 0 0 0 0.1850 0 0
NYY 1.0443 0 0 0.68513 0 0 0 0 0.15743 0 0.15743 0 0 0
OAK 1 0 0 0 0 0 0 0 0 0 1 0 0 0
PHI 1.0358 0 0 0.52631 0 0 0 0.08875 0.38494 0 0 0 0 0
PIT 1.0270 0 0 0.2854 0 0 0 0.10424 0.61036 0 0 0 0 0
SD 1 0 0 0 0 0 0 0 0 0 0 1 0 0
SF 1.0126 0 0 0.5770 0 0 0.00386 0 0 0 0 0.41913 0 0
SEA 1.0691 0 0 0.36319 0.0910 0 0 0.52066 0 0 0 0 0 0.02518
STL 1.0456 0 0 0.45371 0 0 0 0.07854 0.46775 0 0 0 0 0
TB 1 0 0 0 0 0 0 0 0 0 0 0 1 0
TEX 1 0 0 0 0 0 0 0 0 0 0 0 0 1
TOR 1.0284 0 0 0.09691 0.1290 0 0 0.42768 0 0 0 0 0 0.3464
for Sub-DMUs 1–5, respectively, versus 1.0383, 1, 1, 1.0022, and 1.0083 for MON. However,
HOU’s organizational inverse e(ciency is 1.0581, versus 1.4841 for MON. This is because HOU’s
Sub-DMU 1 lies very close to its reference Sub-DMU with respect to all three intermediate products
that it produces. Its factor inverse e(ciency scores are 1.0613, 1.0314, and 1.0317 for TBG, WG,
and ES, respectively. This illustrates the crucial role played by the slacks in a Network DEA Model.
Consider next the Colorado Rockies (COL). They are perfectly e(cient in Sub-DMUs 1, 3, and
5 while Sub-DMUs 2 and 4 have inverse e(ciency scores of 1.3074 and 1.1796, respectively.
Thus, they convert position player salary e(ciently into oNensive and ;elding performance, and
they convert oNensive performance e(ciently into runs gained. In addition, they convert runs gained
and runs surrendered e(ciently into games won. All of the organization’s ine(ciency lies in the
Sub-DMUs that deal with pitching. This reKects the conditions under which COL plays its home
games. Coors Field is located in Denver more than 5000 feet above sea level, an elevation that
creates signi;cant advantages for hitters and disadvantages for pitchers.
Table 9
Sub-DMU 4
ARZ ATL CIN NYM PIT
ANA 1.1337 0.4220 0 0.5327 0.0908 0

ARZ 1 1 0 0 0 0
ATL 1 0 1 0 0 0
BAL 1.0888 0.1807 0 0.2783 0.6027 0
BOS 1.0021 0 0.5799 0 0 0.4261
CHC 1.1083 0.0417 1.2132 0 0 0
CHW 1.0802 0 1.1616 0 0 0.0481
CIN 1 0 0 1 0 0
CLE 1.1380 0.6131 0 0.2593 0.2206 0
COL 1.1796 0.5810 0 0.3186 0.3548 0
DET 1.1708 1.1144 0 0 0 0
FLA 1.0908 0.3613 0 0.4011 0 0.3219
HOU 1.0013 0.7565 0.2461 0 0 0
KC 1.1710 0.7909 0 0.1603 0 0.1763
LA 1.0263 0 0.5392 0 0 0.5248
MIL 1.1096 0.7444 0.4467 0 0 0
MIN 1.0731 1.1649 0 0 0 0
MON 1.0022 0 0 0 0 1.0884
NYM 1 0 0 0 1 0
NYY 1.0475 0.2190 0.2659 0.4050 0 0.1101
OAK 1.1325 0.3620 0.7599 0 0 0
PHI 1.1153 0.7157 0 0 0.3863 0
PIT 1 0 0 0 0 1
SD 1.0423 0 0.8947 0 0 0.2019
SF 1.1102 0.1839 0 0.7074 0.1706 0
SEA 1.1355 0.4157 0 0.5517 0.174 0
STL 1.0690 0 0 0.5362 0 0.5149
TB 1.1173 0.1079 0 0.5624 0 0.4403
TEX 1.0913 1.1644 0 0 0 0
TOR 1.1209 1.1376 0 0 0 0
We gain a diNerent insight from the analysis of the Los Angeles Dodgers (LA). Here we ;nd
that the primary sources of ine(ciency are Sub-DMUs 1 (1.1356) and 2 (1.1148), which constitute
the team’s front o(ce operations, and Sub-DMU 5 (1.1070), which converts runs gained and runs
surrendered into games won. This suggests ;rst that LA could improve the quality of its player
evaluation processes. In addition, the team lost 8 games on the ;eld that they could have won based
on the runs they gained and surrendered. Poor e(ciency in Sub-DMU 5 may occur when a team
loses many close games.
Finally, we investigate the Florida Marlins (FLA). While FLA is slightly more ine(cient than
average in Sub-DMUs 2 (1.0984) and 4 (1.0908), it is e(cient in Sub-DMUs 1 and 5 and nearly
so (1.0101) in Sub-DMU 3. Its organizational inverse e(ciency is 1.0702, considerably better than
average (1.2414). FLA won only 64 games and, even if it had been organizationally e(cient, it still
Table 10
Sub-DMU 5

e(ciency
ANA ATL CHC CLE COL FLA MIN SD TEX
ANA 1 1 0 0 0 0 0 0 0 0
ARZ 1.0255 0 0.92462 0 0.07538 0 0 0 0 0
ATL 1 0 1 0 0 0 0 0 0 0
BAL 1.1403 0 0.31674 0.30678 0 0 0 0 0 0.37648
BOS 1.0309 0 0.7579 0.14859 0 0 0 0 0 0.09351
CHC 1 0 0 1 0 0 0 0 0 0
CHW 1.0038 0 0.17694 0.75465 0 0 0 0 0 0.06841
CIN 1.0501 0 0.7495 0.00658 0 0 0 0 0 0.24392
CLE 1 0 0 0 1 0 0 0 0 0
COL 1 0 0 0 0 1 0 0 0 0
DET 1.0195 0 0.06246 0.78054 0 0 0 0 0.1570 0
FLA 1 0 0 0 0 0 1 0 0 0
HOU 1.0228 0 0.86923 0 0 0 0 0 0.13077 0
KC 1.2275 0 0 0.40611 0 0.22028 0 0 0 0.37361
LA 1.1070 0 0.50267 0.47712 0 0 0 0 0.02021 0
MIL 1.0528 0 0.05666 0.62652 0 0 0 0 0 0.31682
MIN 1 0 0 0 0 0 0 1 0 0
MON 1.0083 0.6321 0 0.25639 0 0 0.11151 0 0 0
NYM 1.0256 0 0.76555 0.05867 0 0 0 0 0 0.17578
NYY 1.0295 0 0.64824 0 0.35176 0 0 0 0 0
OAK 1.0405 0 0.1260 0.19582 0 0 0 0 0 0.6782
PHI 1.1008 0 0.19553 0.42156 0 0 0 0 0 0.38291
PIT 1.0657 0 0.39973 0.35229 0 0 0 0 0.24798 0
SD 1 0 0 0 0 0 0 0 1 0
SF 1.0428 0 0.21919 0.25245 0 0 0 0 0 0.52836
SEA 1.0211 0 0 0.40987 0 0.12425 0 0 0 0.46588
STL 1.0934 0 0.27306 0.54206 0 0 0 0 0 0.18488
TB 1.0211 0 0 0.87286 0 0.00447 0 0 0 0.12267
TEX 1 0 0 0 0 0 0 0 0 1
TOR 1.0456 0 0.0699 0.27606 0 0 0 0 0 0.6540
could have won only 68 games, less than 42% of the games it played. Therefore, we conclude that
FLA’s poor performance was the result of its low player salaries rather than signi;cant ine(ciencies
in its operations. Thus, the management solution for FLA is to spend more money to acquire better
players while maintaining its organizational e(ciency.
We conclude that the Network DEA Model can provide managerial insight into the sources of
ine(ciency within an organization that a standard DEA Model cannot provide. This insight allows
management to focus its attention on the relatively ine(cient Sub-DMUs and to identify particular
intermediate products that fall short of their target values. We believe that the Network DEA Model
oNers management the critical information it needs to improve operations, even if the DMU is
organizationally e(cient.
Table 11
Organizational inverse e(ciencies computed using the Network DEA Model, the Two-Stage DEA Model, and the
One-Stage DEA Model
Team Inverse e(ciencies DiNerences
One-stage Two-stage Network Two-one Net-two Net-one
ANA 1.4176 1.4287 1.4637 0.0111 0.0350 0.0461

ARZ 1.0170 1.0089 1.0300 −0:0081 0.0211 0.0130
ATL 1 1 1 0 0 0
BAL 1.3205 1.2748 1.3176 −0:0457 0.0428 −0:0029
BOS 1.0699 1.0851 1.0857 0.0152 0.0006 0.0158
CHC 1.5027 1.4911 1.5265 −0:0116 0.0354 0.0238
CHW 1.1760 1.2521 1.1859 0.0761 −0:0662 0.0099
CIN 1 1.0094 1.0572 0.0094 0.0478 0.0572
CLE 1.0520 1 1.0555 −0:0520 0.0555 0.0035
COL 1.3879 1.3470 1.4144 −0:0409 0.0674 0.0265
DET 1.3937 1.4020 1.4840 0.0083 0.0820 0.0903
FLA 1.1761 1.2657 1.0702 0.0896 −0:1955 −0:1059
HOU 1.0227 1.0307 1.0581 0.0080 0.0274 0.0355
KC 1.3661 1.4895 1.5885 0.1234 0.0990 0.2225
LA 1.3377 1.3165 1.3377 −0:0212 0.0212 0
MIL 1.3166 1.3145 1.3786 −0:0021 0.0641 0.0621
MIN 1.2104 1.2749 1 0.0645 −0:2749 −0:2104
MON 1 1.1536 1.4841 0.1536 0.3305 0.4841
NYM 1.0420 1.0360 1.0569 −0:0060 0.0209 0.0149
NYY 1.0510 1.0281 1.0510 −0:0229 0.0229 0
OAK 1 1.1105 1.1676 0.1105 0.0571 0.1676
PHI 1.2130 1.2689 1.3295 0.0559 0.0606 0.1165
PIT 1.0796 1.0929 1.2964 0.0133 0.2035 0.2168
SD 1.3316 1.3210 1.3879 −0:0106 0.0669 0.0562
SF 1.1400 1.1479 1.1841 0.0079 0.0362 0.0441
SEA 1.2520 1.2275 1.2903 −0:0245 0.0628 0.0383
STL 1.3089 1.3257 1.3553 0.0168 0.0296 0.0463
TB 1.3933 1.4217 1.2891 0.0284 −0:1326 −0:1042
TEX 1.0842 1.0222 1.0722 −0:0620 0.0500 −0:0121
TOR 1.1662 1.1599 1.2236 −0:0063 0.0637 0.0574
Avg 1.1943 1.2102 1.2414 0.0159 0.0312 0.0471
Range 0.5027 0.4911 0.5885 0.2156 0.6054 0.6945
SD 0.1527 0.1548 0.1742 0.0512 0.1031 0.1162
CV 12.8% 12.8% 14.0%
6. Discussion and conclusion
DEA models treat the DMU as a “black box.” Inputs enter and outputs exit, with no consideration
of the intervening steps. Consequently, it is di(cult, if not impossible, to provide individual DMU
managers with speci;c information regarding the sources of ine(ciency within their DMUs.
We have shown how to use DEA to look inside the DMU, allowing greater insight as to the
sources of organizational ine(ciency. Our model applies to DMUs that consist of two or more
Sub-DMUs, some of which consume resources produced by other Sub-DMUs and some of which
produce resources consumed by other Sub-DMUs. Our Network DEA Model allows for either an
input orientation or an output orientation, any of the four standard assumptions regarding returns to
scale in any Sub-DMU, and adjustments for site characteristics in each Sub-DMU. We have also
demonstrated how to incorporate reverse quantities as inputs, intermediate products, or outputs. Thus,
we can apply the Network DEA Model presented here in many managerial contexts.
By applying the Network DEA Model to MLB, we have demonstrated the advantages of the
Network DEA Model over simpler DEA models. Speci;cally, the Network DEA Model can detect
ine(ciencies that simpler DEA models miss. Perhaps of greatest signi;cance, the Network DEA
Model allows individual DMU managers to focus speci;c e(ciency-enhancing strategies on the
individual components of the production process.
Appendix A.
Complete team names and their designators are given in Table 12.
Table 12
Team Symbol
Anaheim Angels ANA
Arizona Diamondbacks ARZ
Atlanta Braves ATL
Baltimore Orioles BAL
Boston Red Sox BOS
Chicago Cubs CHC
Chicago White Sox CHW
Cincinnati Reds CIN
Cleveland Indians CLE
Colorado Rockies COL
Detroit Tigers DET
Florida Marlins FLA
Houston Astros HOU
Kansas City Royals KC
Los Angeles Dodgers LA
Milwaukee Brewers MIL
Minnesota Twins MIN
Montreal Expos MON
New York Mets NYM
New York Yankees NYY
Oakland Athletics OAK
Philadelphia Phillies PHI
Pittsburgh Pirates PIT
San Diego Padres SD
San Francisco Giants SF
Seattle Mariners SEA
St. Louis Cardinals STL
Tampa Bay Devil Rays TB
Texas Rangers TEX
Toronto Blue Jays TOR
Appendix B.
Detailed results from the Network DEA Model for each MLB team are given in Table 13.
Table 13
ANA Actual * ** Ratio Inv EN E(cient reference sets
POS$ $26,675,166 Team NYM PHI TOR

TBG 2170 2518 1.1603 Weight 0.3837 0.0105 0.6058
WG 511 632 1.2366
ES 106 91 1.1603
Sub-DMU 1 1.1603
PIT$ $25,155,000 Team ATL CIN
TBS 2338 2145 1.0898 Weight 0.6429 0.3571
WS 624 553 1.1282
Sub-DMU 2 1.0898
EG 114 Team ANA
RG 711 711 924 1 Weight 1
Sub-DMU 3 1
RS 826 729 679 1.1337 Team ARZ CIN NYM
Sub-DMU 4 1.1337 Weight 0.4220 0.5327 0.0908
GW 70 70 102 1 Team ANA
Sub-DMU 5 1 Weight 1
GW 70 102 1.4637 Team ATL CLE
Organization 1.4637 Weight 0.9103 0.0897
ARZ Actual * ** Ratio Inv EN E(cient reference sets
POS$ $32,359,000 Team CLE COL NYM TOR

TBG 2595 2606 1.0044 Weight 0.0977 0.4798 0.2160 0.2064
WG 588 591 1.0044
ES 104 104 1.0044
Sub-DMU 1 1.0044
PIT$ $33,719,999 Team ATL
TBS 2238 2100 1.0657 Weight 1
WS 543 507 1.0710
Sub-DMU 2 1.0657
EG 121 Team CLE COL KC
RG 908 922 926 1.0154 Weight 0.3050 0.3864 0.3087
Sub-DMU 3 1.0154
RS 676 676 661 1 Team ARZ
GW 100 103 103 1.0255 Team ATL CLE
Sub-DMU 5 1.0255 Weight 0.9246 0.0754
GW 100 103 1.0300 Team ATL
Organization 1.0300 Weight 1
ATL Actual * ** Ratio Inv EN E(cient reference sets
POS$ $39,982,500 Team CLE COL NYM TEX

TBG 2427 2614 1.0769 Weight 0.4316 0.3299 0.1958 0.0427
Table 13 (continued )
ATL Actual * ** Ratio Inv EN E(cient reference sets
WG 608 655 1.0769

ES 111 103 1.0769
Sub-DMU 1 1.0769
TBS 2100 2100 1 Weight 1
WS 507 507 1
Sub-DMU 2 1
EG 120 Team CLE KC MIN
RG 840 872 960 1.0383 Weight 0.3948 0.3450 0.2603
Sub-DMU 3 1.0383
RS 661 661 661 1 Team ATL
GW 103 103 103 1 Team ATL
GW 103 103 1 Team ATL
Organization 1 Weight 1
BAL Actual * ** Ratio Inv EN E(cient reference sets
POS$ $48,499,139 Team NYM TEX

TBG 2522 2535 1.0053 Weight 0.5974 0.4026
WG 615 674 1.0965
ES 89 89 1.0053
Sub-DMU 1 1.0053
TBS 2399 2119 1.1320 Weight 0.8478 0.1522
WS 647 527 1.2286
Sub-DMU 2 1.1320
RG 851 918 944 1.0786 Weight 0.3902 0.0433 0.5665
Sub-DMU 3 1.0786
Sub-DMU 4 1.0888 Weight 0.1807 0.2783 0.6027
GW 78 89 103 1.1403 Team ATL CHC TEX
Sub-DMU 5 1.1403 Weight 0.3167 0.3068 0.3765
BOS Actual * ** Ratio Inv EN E(cient reference sets
POS$ $29,817,500 Team CLE COL OAK

TBG 2497 2622 1.0501 Weight 0.2265 0.5228 0.2507
WG 597 627 1.0501
ES 127 116 1.0921
Sub-DMU 1 1.0501
PIT$ $29,736,000 Team BOS
TBS 2199 2199 1 Weight 1
WS 469 469 1
BOS Actual * ** Ratio Inv EN E(cient reference sets
Sub-DMU 2 1
EG 113 Team CLE KC TB TEX
RG 836 888 926 1.0618 Weight 0.2211 0.3733 0.2211 0.1846
Sub-DMU 3 1.0618
RS 718 716 692 1.0021 Team ATL PIT
Sub-DMU 4 1.0021 Weight 0.5799 0.4261
Sub-DMU 5 1.0309 Weight 0.7579 0.1486 0.0935
CHC Actual * ** Ratio Inv EN E(cient reference sets

TBG 2303 2640 1.1465 Weight 0.5272 0.3860 0.0868
WG 571 655 1.1465
ES 139 112 1.2408
Sub-DMU 1 1.1465
PIT$ $22,386,000 Team BOS HOU
TBS 2641 2205 1.1978 Weight 0.4689 0.5311
WS 529 474 1.1166
Sub-DMU 2 1.1166
RG 747 801 967 1.0720 Weight 0.2684 0.1653 0.5664
Sub-DMU 3 1.0720
RS 920 830 685 1.1083 Team ARZ ATL
Sub-DMU 4 1.1083 Weight 0.0417 1.2132
GW 67 67 102 1 Team CHC
CHW Actual * ** Ratio Inv EN E(cient reference sets
POS$ $13,860,000 Team OAK TOR

TBG 2421 2512 1.0377 Weight 0.5785 0.4215
WG 499 689 1.3809
ES 136 115 1.1800
Sub-DMU 1 1.0377
PIT$ $10,700,000 Team CIN HOU MON
TBS 2550 2277 1.1199 Weight 0.0053 0.4269 0.5678
WS 596 532 1.1199
Sub-DMU 2 1.1199
EG 112 Team CHW
RG 777 777 777 1 Weight 1
Sub-DMU 3 1
CHW Actual * ** Ratio Inv EN E(cient reference sets
RS 870 805 707 1.0802 Team ATL PIT

Sub-DMU 4 1.0802 Weight 1.1616 0.0481
Sub-DMU 5 1.0038 Weight 0.1769 0.7547 0.0684
GW 75 89 1.1859 Team ATL SD
CIN Actual * ** Ratio Inv EN E(cient reference sets
POS$ $23,213,761 Team COL NYM TOR

TBG 2549 2578 1.0114 Weight 0.0947 0.0872 0.8181
WG 569 583 1.0255
ES 105 104 1.0114
Sub-DMU 1 1.0114
PIT$ $9,949,000 Team CIN
TBS 2227 2227 1 Weight 1
WS 636 636 1
Sub-DMU 2 1
RG 865 901 916 1.0417 Weight 0.2008 0.2875 0.5117
Sub-DMU 3 1.0417
RS 711 711 711 1 Team CIN
Sub-DMU 5 1.0501 Weight 0.7495 0.0066 0.2439
CLE Actual * ** Ratio Inv EN E(cient reference sets
POS$ $46,285,461 Team CLE

TBG 2629 2629 1 Weight 1
WG 743 743 1
ES 106 106 1
Sub-DMU 1 1
PIT$ $21,776,166 Team ATL CIN HOU
TBS 2453 2165 1.1331 Weight 0.4761 0.4287 0.0952
WS 634 560 1.1331
Sub-DMU 2 1.1331
EG 114 Team CLE
RG 1009 1009 1009 1 Weight 1
Sub-DMU 3 1
Sub-DMU 4 1.1380 Weight 0.6131 0.2593 0.2206
GW 97 97 102 1 Team CLE
COL Actual * ** Ratio Inv EN E(cient reference sets
POS$ $32,729,190 Team COL

TBG 2696 2696 1 Weight 1
WG 508 508 1
ES 118 118 1
Sub-DMU 1 1
TBS 2819 2156 1.3074 Weight 0.5568 0.4404 0.0028
WS 737 564 1.3074
Sub-DMU 2 1.3074
EG 120 Team COL
RG 906 906 906 1 Weight 1
Sub-DMU 3 1
Sub-DMU 4 1.1796 Weight 0.5810 0.3186 0.3548
GW 72 72 102 1 Team COL
DET Actual * ** Ratio Inv EN E(cient reference sets
POS$ $22,098,000 Team NYM PHI TOR

TBG 2426 2546 1.0493 Weight 0.1151 0.1006 0.7842
WG 458 599 1.3086
ES 106 101 1.0493
Sub-DMU 1 1.0493
TBS 2494 2255 1.1060 Weight 0.0923 0.5404 0.3673
WS 583 527 1.1060
Sub-DMU 2 1.1060
EG 114 Team DET
RG 747 747 914 1 Weight 1
Sub-DMU 3 1
RS 882 753 681 1.1708 Team ARZ
Sub-DMU 4 1.1708 Weight 1.1144
GW 69 70 102 1.0195 Team ATL CHC SD
Sub-DMU 5 1.0195 Weight 0.0625 0.7805 0.1570
FLA Actual * ** Ratio Inv EN E(cient reference sets
POS$ $7,510,000 Team FLA

TBG 2203 2203 1 Weight 1
WG 479 479 1
ES 127 127 1
Sub-DMU 1 1
TBS 2443 2224 1.0984 Weight 0.7408 0.2455 0.0137
FLA Actual * ** Ratio Inv EN E(cient reference sets
WS 655 596 1.0984

Sub-DMU 2 1.0984
EG 119 Team KC MIN MON
RG 691 698 698 1.0101 Weight 0.0061 0.6517 0.3422
Sub-DMU 3 1.0101
RS 852 781 730 1.0908 Team ARZ CIN PIT
Sub-DMU 4 1.0908 Weight 0.3613 0.4011 0.3219
GW 64 64 68 1 Team FLA
GW 64 68 1.0702 Team MIN SD
HOU Actual * ** Ratio Inv EN E(cient reference sets
POS$ $35,732,500 Team NYM OAK

TBG 2306 2447 1.0613 Weight 0.3567 0.6433
WG 728 751 1.0317
ES 106 103 1.0317
Sub-DMU 1 1.0317
PIT$ $15,896,500 Team HOU
TBS 2210 2210 1 Weight 1
WS 478 478 1
Sub-DMU 2 1
EG 121 Team HOU
RG 823 823 904 1 Weight 1
Sub-DMU 3 1
RS 675 674 673 1.0013 Team ARZ ATL
Sub-DMU 4 1.0013 Weight 0.7565 0.2461
GW 97 99 103 1.0228 Team ATL SD
Sub-DMU 5 1.0228 Weight 0.8692 0.1308
KC Actual * ** Ratio Inv EN E(cient reference sets

TBG 2435 2484 1.0201 Weight 0.8149 0.1851
WG 535 734 1.3728
ES 125 119 1.0501
Sub-DMU 1 1.0201
TBS 2533 2220 1.1411 Weight 0.5377 0.4565 0.0058
WS 643 564 1.1411
Sub-DMU 2 1.1411
EG 113 Team KC
RG 856 856 897 1 Weight 1
Sub-DMU 3 1
Sub-DMU 4 1.1710 Weight 0.7909 0.1603 0.1763
KC Actual * ** Ratio Inv EN E(cient reference sets
GW 64 79 102 1.2275 Team CHC COL TEX

Sub-DMU 5 1.2275 Weight 0.4061 0.2203 0.3736
LA Actual * ** Ratio Inv EN E(cient reference sets
POS$ $44,651,667 Team CLE COL TEX

TBG 2340 2657 1.1356 Weight 0.6091 0.1639 0.2270
WG 594 675 1.1356
ES 137 111 1.2352
Sub-DMU 1 1.1356
TBS 2341 2100 1.1148 Weight 1
WS 594 507 1.1716
Sub-DMU 2 1.1148
RG 793 825 981 1.0408 Weight 0.3700 0.1168 0.5132
Sub-DMU 3 1.0408
RS 787 767 661 1.0263 Team ATL PIT
Sub-DMU 4 1.0263 Weight 0.5392 0.5248
Sub-DMU 5 1.1070 Weight 0.5027 0.4771 0.0202
GW 77 103 1.3377 Team ATL
MIL Actual * ** Ratio Inv EN E(cient reference sets

TBG 2378 2567 1.0793 Weight 0.3575 0.1915 0.4510
WG 658 710 1.0793
ES 127 116 1.0994
Sub-DMU 1 1.0793
TBS 2604 2213 1.1769 Weight 0.0209 0.2834 0.6956
WS 616 523 1.1769
Sub-DMU 2 1.1769
EG 119 Team CLE MIN SD
RG 815 858 969 1.0522 Weight 0.5119 0.2316 0.2565
Sub-DMU 3 1.0522
RS 886 798 694 1.1096 Team ARZ ATL
Sub-DMU 4 1.1096 Weight 0.7444 0.4467
Sub-DMU 5 1.0528 Weight 0.0567 0.6265 0.3168
POS$ $9,002,500 Team MIN
TBG 2110 2110 1 Weight 1
WG 500 500 1
MIN Actual * ** Ratio Inv EN E(cient reference sets
ES 92 92 1
Sub-DMU 1 1
PIT$ $10,240,000 Team MIN
TBS 2607 2607 1 Weight 1
WS 487 487 1
Sub-DMU 2 1
EG 115 Team MIN
RG 686 686 686 1 Weight 1
Sub-DMU 3 1
RS 845 787 787 1.0731 Team ARZ
GW 63 63 63 1 Team MIN
GW 63 63 1 Team MIN
Organization 1 Weight 1
MON Actual * ** Ratio Inv EN E(cient reference sets

TBG 2376 2467 1.0383 Weight 0.9571 0.0429
WG 438 762 1.7392
ES 160 121 1.3189
Sub-DMU 1 1.0383
PIT$ $6,800,000 Team MON
TBS 2328 2328 1 Weight 1
WS 572 572 1
Sub-DMU 2 1
EG 117 Team MON
RG 718 718 915 1 Weight 1
Sub-DMU 3 1
RS 853 851 730 1.0022 Team PIT
GW 68 69 101 1.0083 Team ANA CHC FLA
Sub-DMU 5 1.0083 Weight 0.6321 0.2564 0.1115
NYM Actual * ** Ratio Inv EN E(cient reference sets
POS$ $36,367,928 Team NYM

TBG 2421 2421 1 Weight 1
WG 717 717 1
ES 68 68 1
Sub-DMU 1 1
TBS 2281 2140 1.0657 Weight 0.6821 0.3179
WS 617 548 1.1259
Sub-DMU 2 1.0657
EG 123 Team CLE HOU SD
NYM Actual * ** Ratio Inv EN E(cient reference sets
RG 853 888 888 1.0413 Weight 0.4632 0.3518 0.1850

Sub-DMU 3 1.0413
RS 711 711 677 1 Team NYM
Sub-DMU 5 1.0256 Weight 0.7656 0.0587 0.1758
NYY Actual * ** Ratio Inv EN E(cient reference sets
POS$ $48,351,026 Team CLE NYM OAK

TBG 2521 2615 1.0374 Weight 0.9198 0.0054 0.0749
WG 718 745 1.0374
ES 111 107 1.0374
Sub-DMU 1 1.0374
TBS 2204 2100 1.0495 Weight 1
WS 581 507 1.1460
Sub-DMU 2 1.0495
EG 114 Team CLE MIN OAK
RG 900 940 1000 1.0443 Weight 0.6851 0.1574 0.1574
Sub-DMU 3 1.0443
RS 731 698 661 1.0475 Team ARZ ATL CIN PIT
Sub-DMU 4 1.0475 Weight 0.2190 0.2659 0.4050 0.1101
GW 98 101 103 1.0295 Team ATL CLE
Sub-DMU 5 1.0295 Weight 0.6482 0.3518
GW 98 103 1.0510 Team ATL
OAK Actual * ** Ratio Inv EN E(cient reference sets
POS$ $8,867,833 Team OAK

TBG 2462 2462 1 Weight 1
WG 770 770 1
ES 122 122 1
Sub-DMU 1 1
TBS 2406 2214 1.0868 Weight 0.0098 0.2865 0.7037
WS 569 524 1.0868
Sub-DMU 2 1.0868
EG 113 Team OAK
RG 893 893 893 1 Weight 1
Sub-DMU 3 1
RS 846 747 708 1.1325 Team ARZ ATL
Sub-DMU 4 1.1325 Weight 0.3620 0.7599
Sub-DMU 5 1.0405 Weight 0.1260 0.1958 0.6782
PHI Actual * ** Ratio Inv EN E(cient reference sets
POS$ $16,586,666 Team PHI

TBG 2412 2412 1 Weight 1
WG 631 631 1
ES 100 100 1
Sub-DMU 1 1
TBS 2483 2214 1.1217 Weight 0.0458 0.5039 0.4502
WS 627 559 1.1217
Sub-DMU 2 1.1217
RG 841 871 871 1.0358 Weight 0.5263 0.0888 0.3849
Sub-DMU 3 1.0358
RS 846 759 682 1.1153 Team ARZ NYM
Sub-DMU 4 1.1153 Weight 0.7157 0.3863
Sub-DMU 5 1.1008 Weight 0.1955 0.4216 0.3829
PIT Actual * ** Ratio Inv EN E(cient reference sets

TBG 2292 2507 1.0939 Weight 0.6193 0.3807
WG 573 697 1.2162
ES 147 116 1.2682
Sub-DMU 1 1.0939
PIT$ $8,821,000 Team CIN MON
TBS 2303 2263 1.0176 Weight 0.6418 0.3582
WS 633 613 1.0325
Sub-DMU 2 1.0176
RG 775 796 935 1.0270 Weight 0.2854 0.1042 0.6104
Sub-DMU 3 1.0270
RS 782 782 723 1 Team PIT
Sub-DMU 5 1.0657 Weight 0.3997 0.3523 0.2480
SD Actual * ** Ratio Inv EN E(cient reference sets
POS$ $21,964,680 Team CLE NYM OAK TOR

TBG 2119 2500 1.1797 Weight 0.2197 0.1511 0.5683 0.0608
WG 631 744 1.1797
ES 129 109 1.1797
Sub-DMU 1 1.1797
PIT$ $25,863,666 Team ATL BOS HOU
TBS 2344 2163 1.0838 Weight 0.4094 0.1964 0.3942
SD Actual * ** Ratio Inv EN E(cient reference sets
WS 529 488 1.0838

Sub-DMU 2 1.0838
EG 119 Team SD
RG 710 710 935 1 Weight 1
Sub-DMU 3 1
RS 781 749 671 1.0423 Team ATL PIT
Sub-DMU 4 1.0423 Weight 0.8947 0.2019
GW 74 74 103 1 Team SD
SF Actual * ** Ratio Inv EN E(cient reference sets
POS$ $30,009,057 Team CLE NYM OAK TOR

TBG 2414 2520 1.0439 Weight 0.3364 0.2655 0.2923 0.1058
WG 696 727 1.0439
ES 105 101 1.0439
Sub-DMU 1 1.0439
TBS 2376 2200 1.0798 Weight 0.2064 0.7762 0.0175
WS 655 607 1.0798
Sub-DMU 2 1.0798
EG 121 Team CLE HOU SD
RG 872 883 945 1.0126 Weight 0.5770 0.0039 0.4191
Sub-DMU 3 1.0126
Sub-DMU 4 1.1102 Weight 0.1839 0.7074 0.1706
Sub-DMU 5 1.0428 Weight 0.2192 0.2525 0.5284
SEA Actual * ** Ratio Inv EN E(cient reference sets
POS$ $33,629,836 Team CLE COL OAK TOR

TBG 2536 2625 1.0352 Weight 0.4025 0.2373 0.0192 0.3410
WG 610 631 1.0352
ES 113 109 1.0352
Sub-DMU 1 1.0352
TBS 2556 2194 1.1648 Weight 0.2420 0.6469 0.1111
WS 684 587 1.1648
Sub-DMU 2 1.1648
EG 114 Team CLE COL KC TEX
RG 859 918 946 1.0691 Weight 0.3632 0.0910 0.5207 0.0252
Sub-DMU 3 1.0691
Sub-DMU 4 1.1355 Weight 0.4157 0.5517 0.1740
SEA Actual * ** Ratio Inv EN E(cient reference sets

Sub-DMU 5 1.0211 Weight 0.4099 0.1242 0.4659
STL Actual * ** Ratio Inv EN E(cient reference sets

TBG 2371 2583 1.0896 Weight 0.2116 0.3678 0.4205
WG 613 668 1.0896
ES 132 117 1.1268
Sub-DMU 1 1.0896
TBS 2376 2172 1.0938 Weight 0.4306 0.5694
WS 667 580 1.1491
Sub-DMU 2 1.0938
RG 809 846 960 1.0456 Weight 0.4537 0.0785 0.4678
Sub-DMU 3 1.0456
RS 838 784 706 1.0690 Team CIN PIT
Sub-DMU 4 1.0690 Weight 0.5362 0.5149
Sub-DMU 5 1.0934 Weight 0.2731 0.5421 0.1849
TB Actual * ** Ratio Inv EN E(cient reference sets
POS$ $20,092,500 Team COL OAK TOR

TBG 2296 2574 1.1210 Weight 0.1746 0.2294 0.5960
WG 544 610 1.1210
ES 135 112 1.2079
Sub-DMU 1 1.1210
TBS 2508 2206 1.1367 Weight 0.1588 0.8153 0.0259
WS 695 611 1.1367
Sub-DMU 2 1.1367
EG 112 Team TB
RG 772 772 777 1 Weight 1
Sub-DMU 3 1
Sub-DMU 4 1.1173 Weight 0.1079 0.5624 0.4403
Sub-DMU 5 1.0211 Weight 0.8729 0.0045 0.1227
GW 69 89 1.2891 Team ATL SD
TEX Actual * ** Ratio Inv EN E(cient reference sets
POS$ $48,874,931 Team TEX

TBG 2705 2705 1 Weight 1
WG 611 611 1
ES 119 119 1
Sub-DMU 1 1
PIT$ $25,960,000 Team BOS HOU
TBS 2606 2202 1.1835 Weight 0.7272 0.2728
WS 509 471 1.0796
Sub-DMU 2 1.0796
EG 113 Team TEX
RG 945 945 945 1 Weight 1
Sub-DMU 3 1
RS 859 787 699 1.0913 Team ARZ
GW 95 95 102 1 Team TEX
TOR Actual * ** Ratio Inv EN E(cient reference sets
POS$ $20,710,333 Team TOR

TBG 2581 2581 1 Weight 1
WG 578 578 1
ES 106 106 1
Sub-DMU 1 1
PIT$ $23,799,000 Team ATL BOS HOU
TBS 2546 2165 1.1758 Weight 0.3994 0.0600 0.5406
WS 575 489 1.1758
Sub-DMU 2 1.1758
EG 114 Team CLE COL KC TEX
RG 883 908 908 1.0284 Weight 0.0969 0.1290 0.4277 0.3464
Sub-DMU 3 1.0284
RS 862 769 668 1.1209 Team ARZ
Sub-DMU 5 1.0456 Weight 0.0699 0.2761 0.6540
The column labeled “*” shows the hypothetical values of TBG, WG, and ES if Sub-DMU 1
had been e(cient, the hypothetical values of TBS and WS if Sub-DMU 2 had been e(cient,
the hypothetical value of RG if Sub-DMU 3 had been e(cient, the hypothetical value of RS
if Sub-DMU 4 had been e(cient, and the hypothetical value of GW if Sub-DMU 5 had been
e(cient. The column labeled “**” shows the hypothetical values of RG, RS, and GW had all
preceding Sub-DMUs been e(cient. We have rounded all hypothetical values to the nearest in-
teger. The column labeled “Ratio” shows the ratio of the larger to the smaller of the hypo-
thetical and actual values. The column labeled “Inv EN” shows the inverse e(ciencies for each
Sub-DMU and for the organization. The columns labeled “E(cient reference sets” show the teams
in the e(cient reference sets at each Sub-DMU and for the organization, and their corresponding
weights.
References
[1] Castelli C, Pesenti R, Ukovich W. DEA-like models for e(ciency evaluations of specialized and interdependent
units. European Journal of Operational Research 2001;132:274–86.
[2] Sexton TR, Lewis HF. Two-stage DEA: an application to major league baseball. Journal of Productivity Analysis
2003;19(2/3):227–49.
[3] FLare R, Whittaker G. An intermediate input model of dairy production using complex survey data. Journal of
Agricultural Economics 1995;46(2):201–23.
[4] FLare R, Grosskopf S. Network DEA. Socio-Economic Planning Sciences 2000;34:35–49.
[5] Kumbhakar SC, Knox Lovell CA. Stochastic frontier analysis. Cambridge: Cambridge University Press, 2001.
[6] Skiena SS. The algorithm design manual. New York: Springer-Verlag, 1998. p. 94, 273– 4.
[7] Sedgewick R. Algorithms in C + +. Reading, MA: Addison-Wesley, 1992. p. 479 –81.
[8] Kruse RL, Leung BP, Tondo CL. Data structures and program design in C. Englewood CliNs, NJ: Prentice-Hall,
1991. p. 391–5.
[9] Wiest J, Levy F. Management guide to PERT-CPM, 2nd ed. Englewood CliNs, NJ: Prentice-Hall, 1977.
[10] Seiford LM, Thrall RM. Recent developments in DEA: the mathematical programming approach to frontier analysis.
Journal of Economics 1990;46:7–38.
[11] Lewis HF, Sexton TR. Data envelopment analysis with reverse inputs and outputs. Forthcoming in Journal of
Productivity Analysis.
[12] USA Today (2000). http://www.usatoday.com/sports/baseball/salary/index.htm
[13] Baseball Archive Database (1999). Version 3.0. http://www.baseball1.com/
[14] U.S. Census Bureau (2000). http://www.census.gov/population/estimates/metro-city/ma98-02.txt
[15] Sexton TR, Silkman R. Adjusting inputs for site characteristics. Harriman School Working Paper, Stony Brook
University, 1999.
[16] Norton RN, Sexton TR, Silkman RH. Firm-speci;c productive e(ciency oNsets in the development of a price cap
formula. The Electricity Journal 2002;15(10):43–52.
[17] Fried HO, Schmidt SS, Yaisawarng S. Incorporating the operating environment into a nonparametric measure of
technical e(ciency. Journal of Productivity Analysis 1999;12:249–67.
Herbert F. Lewis is a Lecturer at the W. Averell Harriman School for Management and Policy at the State University
of New York at Stony Brook. He received his Ph.D. in 1996 in operations research from the Department of Applied
Mathematics and Statistics at the State University of New York at Stony Brook. His research interests include productivity
and e(ciency analysis using data envelopment analysis, and solution methods for combinatorial problems in scheduling,
vehicle routing, and facility location.
Thomas R. Sexton is the Director of the W. Averell Harriman School for Management and Policy at the State Univer-
sity of New York at Stony Brook. He earned his Ph.D. in Applied Mathematics and Statistics from the State University
of New York at Stony Brook in 1979. He has published extensively on topics related to productivity, health care manage-
ment, and vehicle routing and scheduling. His recent research is in the areas of productivity and e(ciency measurement
methodologies, student perceptions of Internet learning, and the eNects of mandatory auditor rotation and retention on
audit market share.
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Network DEA: Efﬁciency analysis of organizations with complex

Article in Computers & Operations Research · August 2004

Herbert F. Lewis Thomas R. Sexton

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Computers & Operations Research 31 (2004) 1365 – 1410

Network DEA: e(ciency analysis of organizations with

Fig. 1. Internal structure of a DMU in a Network DEA Model.

2. Network DEA Model formulation

2.1. Model orientation

Thus, for Sub-DMU s in DMU k, the input oriented model is

to be the level of intermediate product p consumed by Sub-DMU s in DMU k if it were e(cient.

to be the level of input i consumed by Sub-DMU s in DMU k if it were e(cient.

2.2. Returns to scale

2.3. Reverse quantities

3. Network DEA theory

Fig. 2. Sub-DMU structure for the example.

DMU Inputs Intermediate products Output

DMU Inverse e(ciencies

Sub-DMU 1 Sub-DMU 2 Sub-DMU 3 DMU

4. Application to major league baseball

Front Office ES On-Field Sub-DMU 5 GW

Fig. 3. Network DEA Model for MLB.

4.1. Inputs, intermediate products, and output

4.2. Output orientation

4.3. Returns to scale

4.3.1. Sub-DMUs 1 and 2: The front o;ce

4.3.2. Sub-DMUs 3 and 4: The oBense and defense

4.3.3. Sub-DMU 5: Winning games

4.4. Network DEA Model for major league baseball

Source PIT$ Sub-DMU 2 Sub-DMU 1 ES Sub-DMU 4 Sub-DMU 3 RG Sub-DMU 5 GW Sink

denote these values with superscript asterisks. Hence, we solve

4.5. Site characteristics for major league baseball

Team Organization Sub-DMU 1 Sub-DMU 2 Sub-DMU 3 Sub-DMU 4 Sub-DMU 5

ANA 1.4637 1.1603 1.0898 1 1.1337 1

Team Inverse e(ciency Reference set weights

ATL CLE MIN SD

ANA 1.4637 0.9103 0.0897 0 0

5.2. Management insights from Sub-DMU analysis

Team Inverse Reference set weights

ANA 1.1603 0 0 0 0 0.38371 0 0.01047 0 0.60582

Team Inverse e(ciency Reference set weights

ATL BOS CIN HOU MIN MON

ANA 1.0898 0.6429 0 0.3571 0 0 0

Team Inverse e(ciency Reference set weights

ARZ ATL CIN NYM PIT

ANA 1.1337 0.4220 0 0.5327 0.0908 0

Team Inverse Reference set weights

Team Inverse e(ciencies DiNerences

One-stage Two-stage Network Two-one Net-two Net-one

ANA 1.4176 1.4287 1.4637 0.0111 0.0350 0.0461

6. Discussion and conclusion

ANA Actual * ** Ratio Inv EN E(cient reference sets

POS$ $26,675,166 Team NYM PHI TOR

ARZ Actual * ** Ratio Inv EN E(cient reference sets

POS$ $32,359,000 Team CLE COL NYM TOR

ATL Actual * ** Ratio Inv EN E(cient reference sets

POS$ $39,982,500 Team CLE COL NYM TEX

ATL Actual * ** Ratio Inv EN E(cient reference sets

WG 608 655 1.0769

BAL Actual * ** Ratio Inv EN E(cient reference sets