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Efficiency analysis with ratio measures

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journal contribution
posted on 07.07.2015, 09:22 by Ole Bent Olesen, Niels Christian Petersen, Victor Podinovski
In applications of data envelopment analysis (DEA) data about some inputs and outputs is often available only in the form of ratios such as averages and percentages. In this paper we provide a positive answer to the long-standing debate as to whether such data could be used in DEA. The problem arises from the fact that ratio measures generally do not satisfy the standard production assumptions, e.g., that the technology is a convex set. Our approach is based on the formulation of new production assumptions that explicitly account for ratio measures. This leads to the estimation of production technologies under variable and constant returns-to-scale assumptions in which both volume and ratio measures are native types of data. The resulting DEA models allow the use of ratio measures “as is”, without any transformation or use of the underlying volume measures. This provides theoretical foundations for the use of DEA in applications where important data is reported in the form of ratios.

History

School

  • Business and Economics

Department

  • Business

Published in

European Journal of Operational Research

Volume

245

Issue

2

Pages

446 - 462

Citation

OLESEN, O.B., PETERSEN, N.C. and PODINOVSKI, V.V., 2015. Efficiency analysis with ratio measures. European Journal of Operational Research, 245 (2), pp.446–462

Publisher

© Elsevier B.V.

Version

AM (Accepted Manuscript)

Publisher statement

This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/

Acceptance date

09/03/2015

Publication date

2015-03-16

Notes

This paper was accepted for publication in the journal European Journal of Operational Research and the definitive published version is available at http://dx.doi.org/10.1016/j.ejor.2015.03.013.

ISSN

0377-2217

Language

en

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