The decoy effect in relative performance evaluation and the debiasing role of DEA

Heinz Ahn and Nadia Vazquez Novoa

European Journal of Operational Research, 2016, vol. 249, issue 3, 959-967

Abstract: There is overwhelming evidence that performance ratings and evaluations are context dependent. A special case of such context effects is the decoy effect, which implies that the inclusion of a dominated alternative can influence the preference for non-dominated alternatives. Adapting the well-known experimental setting from the area of consumer behavior to the performance evaluation context of Data Envelopment Analysis (DEA), an experiment was conducted. The results show that adding a dominated decision making unit (DMU) to the set of DMUs augments the attractiveness of certain dominating DMUs and that DEA efficiency scores discriminating between efficient and inefficient DMUs serve as an appropriate debiasing procedure. The mention of the existence of slacks for distinguishing between strong and weak efficient DMUs also contributes to reducing the decoy effect, but it is also associated to other unexpected effects.

Keywords: Behavioral OR; Decoy effect; Data Envelopment Analysis; Debiasing procedure; Performance measurement (search for similar items in EconPapers)
JEL-codes: C91 D24 D81 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:249:y:2016:i:3:p:959-967

DOI: 10.1016/j.ejor.2015.07.045

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