Centralized resource reduction and target setting under DEA control

Farhad Hosseinzadeh Lotfi (), Adel Hatami-Marbini, Per Agrell () and Kobra Gholami ()
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Farhad Hosseinzadeh Lotfi: Islamic Azad University, Tehran, Iran
Kobra Gholami: Islamic Azad University, Tehran, Iran

No 2013005, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Data envelopment analysis (DEA) is a powerful tool for measuring the relative efficiencies of a set of decision making units (DMUs) such as schools and bank branches that transform multiple inputs to multiple outputs. In centralized decision-making systems, management normally imposes common resource constraints such as fixed capital, budgets for operating capital and staff count. In consequence, the profit or net value added of the units subject to resource reductions will decrease. In terms of performance evaluation combined with resource allocation, the interest of central management is to restore the general efficiency value of the DMUs. The paper makes four contributions to the literature: (1) we take into consideration the performance evaluation of the centralized budgeting of hierarchical organizations along with sales and market allocation within manufacturing and distribution organizations; (2) we address the evaluation problems that the central decision maker does not desire to deteriorate the efficiency score of the DMUs after input and/or output reduction; (3) we develop a common set of weights (CSW) method based on the goal program (GP) concept to control the total weight flexibility in the conventional DEA models; (4) we extend a new approach to optimize the inputs and/or outputs contraction such that the efficiency of all DMUs will get bigger than or equal to the efficiency of previous change. We ultimately present a numerical example involving with three inputs and two outputs to illustrate the applicability and efficacy of the proposed approach.

Keywords: data envelopment analysis; inputs and outputs deterioration; common set of weights (search for similar items in EconPapers)
JEL-codes: C14 C61 M11 (search for similar items in EconPapers)
Date: 2013-02-22
New Economics Papers: this item is included in nep-eff
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Citations: View citations in EconPapers (3)

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