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Ranking Efficient Units in Dea
Ranking Efficient Units in Dea
com
Abstract
Super-eciency data envelopment analysis (DEA) model can be used in ranking the performance of ecient decision
making units (DMUs). Because of the infeasibility problem associated with the super-eciency DEA model, ranking has been
restricted to the model where constant returns to scale and proportional changes in all inputs or all outputs are assumed. In fact,
when super-eciency is used as an eciency stability measure, infeasibility means the highest super-eciency. However,
if super-eciency is interpreted as input saving or output surplus achieved by a speci5c ecient DMU, infeasibility does
not necessarily mean the highest super-eciency. In order to obtain a complete ranking of ecient DMUs when the two
assumptions are relaxed, a modi5ed super-eciency DEA model is proposed to overcome the infeasibility problem and to
correctly capture the super-eciency represented by the input saving or the output surplus. The current paper suggests using
both input- and output-oriented super-eciency models to characterize the super-eciency when infeasibility occurs. As a
result, we can rank the ecient DMUs if infeasibility occurs. The approach is applied to 20 largest Japanese companies and
15 US cities, respectively.
? 2004 Elsevier Ltd. All rights reserved.
0305-0483/$ - see front matter ? 2004 Elsevier Ltd. All rights reserved.
doi:10.1016/j.omega.2003.11.001
214 Y. Chen / Omega 32 (2004) 213 – 219
saving/output surplus achieved by an ecient DMU. If which exhibits VRS can be written as [13]
super-eciency is used as an eciency stability measure,
then infeasibility means that an ecient DMU’s eciency min o
classi5cation is stable in the presence of data errors. There-
n
fore, we can use +∞ to represent the super-eciency score. s:t:
j xij 6 o xio ; i = 1; 2; : : : ; m;
Consequently, the infeasibility problem is solved and we j=1
can have a complete ranking of ecient DMUs in terms of
eciency stability.
n
j yrj ¿ yro ; r = 1; 2; : : : ; s;
Using the variable returns to scale (VRS) super-eciency
j=1
DEA model as an example, the current study extends
the work of Chen [12] and discusses the situation when
n
the output surplus. A modi5ed super-eciency DEA model s:t:
j xij 6 oVRS-super xio ; i = 1; 2; : : : ; m;
j=1
is provided to overcome the infeasibility problem and to j=0
correctly capture the possible super-eciency existing in
forms of the input saving or the output surplus. It is shown
n
that if the modi5ed super-eciency DEA model is still in-
j yrj ¿ yro ; r = 1; 2; : : : ; s;
j=1
feasible, then this infeasibility means zero super-eciency. j=0
We study the super-eciency under the condition that
not all inputs (or outputs) are simultaneously changed in
n
n
Property (ii). For a DMUo , if there exists a G ⊂ {1; : : : ; m}
j = 1;
such that GVRS-super ¡ 1, then oVRS-super 6 1.
∗ ∗
j=1
j=0
j ¿ 0; j = 0: (3)
6 min {GVRS-super }.
∗
G⊂{1;:::; m}
Thus, if DMUo has the largest output values (regardless
of the input values), model (2) must be infeasible. Since a
Note that if oVRS-super 6 1, then any optimal so-
∗
data set always contains at least such a DMUo , model (2)
must be infeasible and in order to obtain a complete ranking, lution to (2) is a feasible solution to (4). Therefore,
oVRS-super ¿ GVRS-super for all G ⊂ {1 : : : ; m}. Thus
∗ ∗
we have to solve the infeasibility problem associated with
model (2).
Property (iv). For DMUo , if oVRS-super 6 1, then oVRS-super
∗ ∗
Model (2) assumes that all inputs must change in the
¿ max {GVRS-super }.
∗
same proportion. i.e., model (2) measures super-eciency
in terms of all inputs. If a subset of inputs, denoted as G ⊂ G⊂{1;:::; m}
j=0
j = 1;
j=1
j=0
n
j = 1;
j=1
j ¿ 0 (j = o): (5)
j=0
Thus, if DMUo has the smallest input values (regardless
j ¿ 0; j = 0: (4) of the output values), model (5) must be infeasible. Since
a data set always contains at least such a DMUo , model (5)
Note that when G = {1; : : : ; m}, model (4) becomes must be infeasible and in order to obtain a complete ranking,
model (2). Model (4) basically measures how much DMUo we have to solve the infeasibility problem associated with
can change its inputs associated with G before DMUo model (5).
reaches the frontier constructed from the remaining DMUs, Based upon Seiford and Zhu [9], Chen [12] shows the
i.e., model (4) measures the super-eciency in terms of following theorems with respect to the infeasibility.
inputs represented by G. Four possible cases are associ-
ated with (4): (i) GVRS-super ¿ 1; (ii) GVRS-super = 1; (iii)
∗ ∗
Theorem 1. If model (2) is infeasible and DMUo is
VRS-super ∗
G ¡ 1 and (iv) (4) is infeasible. 2 CRS-ine1cient, then model (5) must be feasible. 4
By comparing models (2) and (4), we can easily have 3
Theorem 2. If model (5) is infeasible and DMUo is
Property (i). For a DMUo , oVRS-super ¿ 1, if and only if
∗
CRS-ine1cient, then model (2) must be feasible.
there exists a G ⊂ {1; : : : ; m} such that GVRS-super ¿ 1 or
∗
(4) is infeasible. Theorem 3. Both models (2) and (5) are infeasible if and
only if DMUo is the only VRS e1cient DMU.
2 See [7] for a version under CRS associated with the same
Theorems 1–3 show that one of the input-oriented and
four possible cases i.e., even under the condition of CRS,
output-oriented VRS super-eciency DEA models must be
super-eciency DEA model can also be infeasible if only a subset
of inputs is of interest.
3 We assume that G = {1; : : : ; m}. Otherwise, model (4) is the 4 Seiford and Zhu [9] also show that if model (5) is infeasible,
model (2) if G = {1; : : : ; m}. then DMUo must exhibit CRS or IRS.
216 Y. Chen / Omega 32 (2004) 213 – 219
3. Infeasibility
j ¿ 0: (7)
Since either model (2) or model (5) must be infeasi-
ble for some ecient DMUs, in order to obtain a complete Applying model (6) is equivalent to applying model
ranking, we have to assign a super-eciency score for the (2) after all inecient DMUs are projected onto the VRS
infeasibility. frontier via proportional output augmentation through
It can be seen that super-eciency measures how far model (7).
DMUo is from the frontier constructed by the remaining Model (6) provides a correct characterization of
DMUs in terms of input increases in model (2) or output super-eciency in terms of input saving, since model (6)
decreases in model (5). Thus, if super-eciency is used as measures the possible input saving achieved by DMUo
a measure to measure the eciency stability, we have that against all other DMUs’ input levels.
infeasibility indicates that DMUo ’s eciency classi5cation Note that model (6) may still be infeasible if g∗ ¡ 1 in
is stable to any simultaneous input changes if model (2) is model (3) when yrj are replaced by ŷ rj (=∗ yrj ). This
infeasible or to any simultaneous output changes if model indicates that DMUo does not indicate super-eciency in
(5) is infeasible [8]. Therefore, we can denote the optimal terms of input saving, since DMUo cannot be moved onto
value of oVRS-super as +∞ to represent the super-eciency the frontier constructed from the remaining DMUs via in-
score. As a result, ecient DMUs associated with infea- put increases, indicating that DMUo has the largest input
sibility are top ranked and infeasibility means the highest levels given the current output levels. We therefore denote
super-eciency. oVRS-super = ˜VRS -super∗ = 1 when model (6) is infeasible, in-
∗
o
Now, suppose model (2) is feasible when an ecient dicating zero input super-eciency which means zero input
DMUo is under evaluation. The optimal value of oVRS-super saving for DMUo .
indicates that the inputs of DMUo can be increased to reach Let o represent the score for characterizing the
a level that is used by other DMUs or by the convex com- super-eciency in terms of input saving, we have
bination of other DMUs. To achieve this, we solve model
(2) in the following format: 5
oVRS-super ;
∗
if model (2) is feasible;
min VRS-super
o
˜VRS-super∗ ;
o if model (2) is infeasible and model
n
o =
s:t:
j xij 6 ˜oVRS-super xio ; i = 1; 2; : : : ; m;
(10) is feasible;
j=1
j=o 1; if model (6) is infeasible:
n (8)
j ŷ rj ¿ = ŷ ro = yro ; r = 1; 2; : : : ; s;
j=1
j=o Note that o ¿ 1. If o ¿ 1, a speci5c ecient DMUo has
input super-eciency. If o = 1, DMUo does not have in-
n
put super-eciency. Thus, based upon o , a complete per-
j = 1;
j=1
formance ranking of ecient DMUs can be obtained even
j=o if model (2) or model (6) is infeasible. When model (6) is
infeasible, g∗ ¡ 1 indicates that the super-eciency is ac-
j ¿ 0 j = o: (6) tually reGected in DMU’s outputs via output surplus.
∗ ∗ Similar to model (6), we may also adjust the input values
where ŷ rj = yrj and is the optimal value to the fol-
in model (5) by the input-oriented VRS DEA model (1)
lowing output-oriented VRS DEA model
when model (5) is feasible.
∗o = max o
max ˜ oVRS-super
n
s:t:
j xij 6 xio ; i = 1; 2; : : : ; m;
j=1
n
s:t:
j x̂ij 6 x̂io = xio ; i = 1; 2; : : : ; m;
j=1
5 See [12] for an numerical example. j=o
Y. Chen / Omega 32 (2004) 213 – 219 217
n
n
j yrj ¿ ˜ oVRS-super yro ; r = 1; 2; : : : ; s;
j yrj ¿ yro ; r = 1; 2; : : : ; s;
j=1 j=1
j=o
n
n
j = 1;
j = 1; j=1
j=1
j=o
j ¿ 0; j = 1; : : : ; n: (13)
j ¿ 0; (j = o): (9)
Model (13) is a VRS DEA model where inputs that are
where x̂ij = j∗ xij
and j∗
is the optimal value to model (1) not associated with set G are allowed to improve. If DMUo
when DMUj is under evaluation. is ecient under model (1), it must also be ecient under
Let o represent the score for characterizing the output model (13).
super-eciency, we have Then, based upon model (13), for DMUj (j = o),
VRS -super∗ if model (5) is feasible; let x̃ij = G∗ xij , and we solve model (4) in the following
o
format:
˜ VRS-super∗ if model (5) is feasible and model
o
o =
min ˜GVRS-super
(14) is feasible;
n
1 if model (9) is infeasible: s:t:
j xij 6 ˜GVRS-super xio ; i ∈ G;
(10) j=1
j=o
Note that o 6 1. If o ¡ 1, a speci5c ecient DMUo
has output super-eciency. If o = 1, DMUo does not have
n
Table 1
Japanese companies
VRS-super ∗
DMU Company Main business Asset Equity Employee Revenue o∗ ∗o o
1 Mitsui & Co. General trading 50905.3 5137.9 40,000 106,793.2 1 1 Infeasible
2 Itochu Corp. General trading 51432.5 2333.8 5775 106,184.1 1 1 6.69295
3 Mitsubishi Corp. General trading 67553.2 7253.2 36,000 104,656.3 0.74248 1.01974
4 Toyota Motor Corp. Cars, trucks 112698.1 47177 183,879 97,387.6 0.4108 1.09658
5 Marubeni Corp. General trading 49742.9 2704.3 5844 91,361.7 0.91739 1.12202
6 Sumitomo Corp. General trading 41168.4 4351.5 30,700 86,921 1 1 1.02091
7 Nippon Telegraph & Tel. Telecommunications 133008.8 47467.1 138,150 74,323.4 0.26865 1.43687
8 Nissho Iwai Corp. General trading 35581.9 1274.4 19,461 66,144 1 1 1.14580
9 Hitachi Ltd. Electronics, machinery 73917 21914.2 328,351 60,937.9 0.40528 1.75249
10 Matsushita Electric Indl. Appliances, electronics 60639 26988.4 282,153 58,361.6 0.47569 1.82985
11 Sony Corp. Electronics, media 48117.4 13930.7 177,000 51,903 0.54156 1.94793
12 Nissan Motor Cars, car parts 52842.1 9583.6 39,467 50,263.5 0.47975 2.12448
13 Honda Motor Cars, motorcycles 38455.8 13473.8 112,200 47,597.9 0.62931 1.69408
14 Toshiba corp. Electronics, machinery 46013 8023.3 198,000 40,492.7 0.45933 2.39076
15 Fujitsu Ltd. Computers 39052.2 8901.6 188,000 40,050.3 0.53631 2.04784
16 Tokyo electric power Power generation 110055.8 12157.7 50,558 38,869.5 0.18567 2.74748
17 Nec Corp. Electronics, computers 38015 6517.4 157773 36,356.4 0.50901 2.18979
18 Tomen Corp. General trading 16696 676.1 3654 30,205.3 1 1 2.89988
19 Japan Tobacco Cigarettes 17023.6 10816.6 31,000 29,612.2 0.98076 1.04567
20 Mitsubishi Electric Corp. Electronics 31997 4129.6 116,479 28,982.2 0.5218 2.26573
4.1. Ranking of Japanese companies report the input super-eciency score o de5ned in (8)
and the output super-eciency score o de5ned in (10),
The DEA inputs are asset, equity and number of employ- respectively.
ees and the DEA output is revenue. Either model (1) or Both models (2) and (6) are infeasible for DMU 3
model (7) indicates that 5 of them are VRS-ecient (see (Philadelphia), DMU 8 (Washington) and DMU13 (Boston)
columns 7 and 8 in Table 1). In order to discriminate the (see column 11 in Table 2). This indicates that the three
performance of these 5 VRS-ecient companies, we ap- cities do not have super-eciency in terms of their in-
ply model (2). The last column of Table 1 reports the op- put values. We assign one as their input super-eciency
timal value to (2), oVRS-super . It can be seen that model
∗
score and then turn to model (5) to characterize the output
(2) is infeasible when DMU 1 (Misui) is under evalua- super-eciency. Model (5) shows that DMU 3 and DMU
tion. We 5rst adjust the original output values for all DMUs 8 are the two top-ranked cities along with DMU 13 ranked
by their output-oriented VRS eciency scores from model number 4, indicating that the three cities achieve higher
(7) (∗o ) and then apply model (10) to DMU 1. We ob- output levels.
tain ˜VRS -super∗ = 2:36628 (optimal value to (14)) as the (in- Note that the 11th and 12th columns verify Theorems 1
o
put) super-eciency score for DMU 1. Thus, we have the and 2. DMU 2 (Denver) and DMU 9 (Pittsburgh) are in-
top-ranked Japanese company DMU 2 (Itochu) followed by feasible under models (5) while they are feasible under
DMU 18 (Tomen), DMU 1 (Mitsui), DMU 8 (Nissho) and model (2).
DMU 6 (Sumitomo). Since both models (5) and (11) are infeasible for DMU 2
and DMU 9, we assign one as their output super-eciency
score.
4.2. Ranking of US cities
The last two columns of Table 2 report integrated
super-eciency scores So and Ŝ o , respectively, when
We here use high-end housing price (1000 US$),
w = w = 0:5. Except for DMU 4 and DMU 13, the two
lower-end housing monthly rental (US$), and number of
scores yield a consistent ranking of the 10 ecient cities.
violent crimes as three DEA inputs and median household
income (US$), number of population with bachelor’s de-
gree (million) and number of doctors (thousand) as three 5. Conclusions
DEA outputs in evaluating the 15 US cities.
The 9th and 10th columns of Table 2 report the optimal The current paper shows that if super-eciency is used as
values to models (1) and (7), respectively. It can be seen an eciency stability measure, then the infeasibility means
that 10 cities are ecient. Columns 11 and 12 of Table 2 the highest super-eciency. However, if super-eciency
Y. Chen / Omega 32 (2004) 213 – 219 219
0.99216 (10)
is interpreted as input saving/output surplus, the infeasi-
0.80370 (3)
0.77336 (2)
0.86773 (5)
0.82575 (4)
0.97834 (9)
0.87933 (6)
0.95580 (8)
0.88837(7)
0.65993(1)
bility may indicate zero super-eciency. The applications
show that we can overcome the infeasibility problem. Since
Sˆo a
(2)
(6)
(7)
(1)
1.26746 (4)
1.02265 (9)
1.15906 (5)
1.04659 (8)
and rank the ecient DMUs, both input-oriented and
1.26839
1.00797
1.41454
1.15677
1.12712
1.51531
output-oriented super-eciency DEA models are needed.
So a
Acknowledgements
1 (infeasible)
1 (infeasible)
0.91456
0.54672
0.92080
0.92032
0.66035
0.65150
0.75866
0.97315
The author is grateful to the helpful comments and sug-
gestions made by two anonymous referees.
o
1 (infeasible)
1 (infeasible)
1 (infeasible)
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