Academic Journals Database
Disseminating quality controlled scientific knowledge

Pitfalls and Remedies in DEA Applications: How to Handle an Occurrence of Zero in Multipliers by Strong Complementary Slackness Conditions

ADD TO MY LIST
 
Author(s): Toshiyuki Sueyoshi | Mika Goto

Journal: Engineering
ISSN 1947-3931

Volume: 05;
Issue: 05;
Start page: 29;
Date: 2013;
Original page

Keywords: DEA | Strong Complementary Slackness Conditions | Linear Programming

ABSTRACT
This study discusses a guideline on a proper use of Data Envelopment Analysis (DEA) that has been widely used for performance analysis in public and private sectors. The use of DEA is equipped with Strong Complementary Slackness Conditions (SCSCs) in this study, but an application of DEA/SCSCs depends upon its careful use, as summarized in the guideline. The guideline consists of the five suggestions. First, a data set used in the DEA applications should not have a ratio variable (e.g., financial ratios) in an input(s) and/or an output(s). Second, radial DEA models under variable and constant Returns to Scale (RTS) need a special treatment on zero in a data set. Third, the DEA evaluation needs to drop an outlier. Fourth, an imprecise number (e.g., 1/3) may suffer from a round-off error because DEA needs to specify it in a precise expression to operate a computer code. Finally, when a large input or output variable may dominate other vari- ables in DEA computation, it is necessary to normalize the data set or simply to divide each observation by its average. Such a simple treatment produces more reliable DEA results than the one without any data adjustment. This study also discusses how to handle an occurrence of zero in DEA multipliers by applying SCSCs. The DEA/SCSCs can serve for a multiplier restriction approach without any prior information. Thus, the propesed DEA/SCSCs can provide more reli- able results than a straight use of DEA.
RPA Switzerland

Robotic Process Automation Switzerland

    

Tango Jona
Tangokurs Rapperswil-Jona