Using interactive multiobjective methods to solve DEA problems with value judgements

Abstract

Data envelopment analysis (DEA) is a performance measurement tool that was initially developed without consideration of the decision maker (DM)'s preference structures. Ever since, there has been a wide literature incorporating DEA with value judgements such as the goal and target setting models. However, most of these models require prior judgements on target or weight setting. This paper will establish an equivalence model between DEA and multiple objective linear programming (MOLP) and show how a DEA problem can be solved interactively without any prior judgements by transforming it into an MOLP formulation. Various interactive multiobjective models would be used to solve DEA problems with the aid of PROMOIN, an interactive multiobjective programming software tool. The DM can then search along the efficient frontier to locate the most preferred solution where resource allocation and target levels based on the DM's value judgements can be set. An application on the efficiency analysis of retail banks in the UK is examined. Comparisons of the results among the interactive MOLP methods are investigated and recommendations on which method may best fit the data set and the DM's preferences will be made.