Measuring the performances of decision-making units using interval efficiencies

Abstract

Efficiency is a relative measure because it can be measured within different ranges. The traditional data envelopment analysis (DEA) measures the efficiencies of decision-making units (DMUs) within the range of less than or equal to one. The corresponding efficiencies are referred to as the best relative efficiencies, which measure the best performances of DMUs and determine an efficiency frontier. If the efficiencies are measured within the range of greater than or equal to one, then the worst relative efficiencies can be used to measure the worst performances of DMUs and determine an inefficiency frontier. In this paper, the efficiencies of DMUs are measured within the range of an interval, whose upper bound is set to one and the lower bound is determined through introducing a virtual anti-ideal DMU, whose performance is definitely inferior to any DMUs. The efficiencies turn out to be all intervals and are thus referred to as interval efficiencies, which combine the best and the worst relative efficiencies in a reasonable manner to give an overall measurement and assessment of the performances of DMUs. The new DEA model with the upper and lower bounds on efficiencies is referred to as bounded DEA model, which can incorporate decision maker (DM) or assessor's preference information on input and output weights. A Hurwicz criterion approach is introduced and utilized to compare and rank the interval efficiencies of DMUs and a numerical example is examined using the proposed bounded DEA model to show its potential application and validity.