Improving production possibility set with production trade-offs

Abstract

Adding weight restrictions on multiplier DEA models to incorporate value judgments is equivalent to accepting trade-offs between inputs and outputs in envelopment forms. To obtain the corresponding DEA model with the trade-off axiom, the production possibility set (PPS) is changed which has led to the introduction of the three-stage model. Although the efficiency of DMUs and efficient targets can be determined by the three-stage model, the result might be unacceptable because of locating the PPS in the negative area; clarification for which has been provided by means of a numerical example. An improved PPS and its corresponding model will be presented in this paper. The structure of the modified PPS preserves its non-negativity and efficient targets can be achieved through solving merely one max-slack model.