An alternative derivation of the basic DEA models for gauging the productive performances of operating entities

Abstract

Using a Decision Analysis (DA) model for decision-making under partial probability information, we derive the basic Data Envelopment Analysis (DEA) models. The DA model has two components: the choice of a strategy and the occurrence of events. There is an outcome associated with each strategy–event combination. A Linear Programming (LP) model is formulated to reveal the strategies that are called efficient for given event probability ranges. Viewing the strategies as entities and the events as activity categories with outcomes that may have positive or negative effects on the entities' performance, the LP model can be configured for gauging the entities' productive performances. One particular configuration of the LP model called the LP-DM leads to the basic models of DEA. The LP-DM proffers a new starting point for developing methods that gauge productive performance and a different perspective that reiterates the caution that must be exercised in the application of DEA and use of its results for policy making.