Network DEA pitfalls: Divisional efficiency and frontier projection

Yao Chen, Wade D. Cook, Chiang Kao, Joe Zhu

Research output: Chapter in Book/Report/Conference proceedingChapter

6 Citations (Scopus)

Abstract

Recently network DEA models have been developed to examine the efficiency of DMUs with internal structures. The internal network structures range from a simple two-stage process to a complex system where multiple divisions are linked together with intermediate measures. In general, there are two types of network DEA models. One is developed under the standard multiplier DEA models based upon the DEA ratio efficiency, and the other under the envelopment DEA models based upon production possibility sets. While the multiplier and envelopment DEA models are dual models and equivalent under the standard DEA, such is not necessarily true for the two types of network DEA models. Pitfalls in network DEA are discussed with respect to the determination of divisional efficiency, frontier type, and projections. We point out that the envelopment-based network DEA model should be used for determining the frontier projection for inefficient DMUs while the multiplier-based network DEA model should be used for determining the divisional efficiency. Finally, we demonstrate that under general network structures, the multiplier and envelopment network DEA models are two different approaches. The divisional efficiency obtained from the multiplier network DEA model can be infeasible in the envelopment network DEA model. This indicates that these two types of network DEA models use different concepts of efficiency. We further demonstrate that the envelopment model’s divisional efficiency may actually be the overall efficiency.

Original languageEnglish
Title of host publicationInternational Series in Operations Research and Management Science
PublisherSpringer New York LLC
Pages31-54
Number of pages24
DOIs
Publication statusPublished - 2014 Jan 1

Publication series

NameInternational Series in Operations Research and Management Science
Volume208
ISSN (Print)0884-8289

All Science Journal Classification (ASJC) codes

  • Software
  • Computer Science Applications
  • Strategy and Management
  • Management Science and Operations Research
  • Applied Mathematics

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    Chen, Y., Cook, W. D., Kao, C., & Zhu, J. (2014). Network DEA pitfalls: Divisional efficiency and frontier projection. In International Series in Operations Research and Management Science (pp. 31-54). (International Series in Operations Research and Management Science; Vol. 208). Springer New York LLC. https://doi.org/10.1007/978-1-4899-8068-7_2