Benefit-cost analysis using data envelopment analysis

Norman Womer, M.-L. Bougnol, J. Dula and D. Retzlaff-Roberts

Annals of Operations Research, 2006, vol. 145, issue 1, 229-250

Abstract: Benefit-cost analysis is required by law and regulation throughout the federal government. Robert Dorfman (1996) declares ‘Three prominent shortcomings of benefit-cost analysis as currently practiced are (1) it does not identify the population segments that the proposed measure benefits or harms (2) it attempts to reduce all comparisons to a single dimension, generally dollars and cents and (3) it conceals the degree of inaccuracy or uncertainty in its estimates.’ The paper develops an approach for conducting benefit-cost analysis derived from data envelopment analysis (DEA) that overcomes each of Dorfman's objections. The models and methodology proposed give decision makers a tool for evaluating alternative policies and projects where there are multiple constituencies who may have conflicting perspectives. This method incorporates multiple incommensurate attributes while allowing for measures of uncertainty. An application is used to illustrate the method. Copyright Springer Science+Business Media, LLC 2006

Keywords: Benefit-cost analysis; Data envelopment analysis (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s10479-006-0036-5

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