Meta-data envelopment analysis: Finding a direction towards marginal profit maximization

Chia Yen Lee

Research output: Contribution to journalArticlepeer-review

33 Citations (Scopus)

Abstract

This paper discusses a new meta-DEA approach to solve the problem of choosing direction vectors when estimating the directional distance function. The proposed model emphasizes finding the "direction" for productivity improvement rather than estimating the "score" of efficiency; focusing on "planning" over "evaluation". In fact, the direction towards marginal profit maximization implies a step-by-step improvement and "wait-and-see" decision process, which is more consistent with the practical decision-making process. An empirical study of U.S. coal-fired power plants operating in 2011 validates the proposed model. The results show that the efficiency measure using the proposed direction is consistent with all other indices with the exception of the direction towards the profit-maximized benchmark. We conclude that the marginal profit maximization is a useful guide for determining direction in the directional distance function.

Original languageEnglish
Pages (from-to)207-216
Number of pages10
JournalEuropean Journal of Operational Research
Volume237
Issue number1
DOIs
Publication statusPublished - 2014 Aug 16

All Science Journal Classification (ASJC) codes

  • Computer Science(all)
  • Modelling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

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