Cross-Efficiency Evaluation Method Taking Management Objectives as Reference Points from Peer Perspective

Hai-Liu Shi (), Sheng-Qun Chen (), Ying-Ming Wang and Yan Huang ()
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Hai-Liu Shi: School of Media and Exhibition, Fujian Business University, Fuzhou 350506, P. R. China
Sheng-Qun Chen: School of Information Engineering, Fujian Business University, Fuzhou 350108, P. R. China
Ying-Ming Wang: Business School, Yango University, Fuzhou 350506, P. R. China
Yan Huang: School of Computer and Information Sciences, Fujian Agriculture and Forestry University, Fuzhou 350002, P. R. China

Asia-Pacific Journal of Operational Research (APJOR), 2022, vol. 39, issue 06, 1-26

Abstract: According to the management by objectives (MBO) theory, performance evaluations should take into account the achievement of management objectives (MOs). The most commonly used performance evaluation method — the cross-efficiency evaluation method — seldom considers the role of MOs as a reference point. According to the prospect theory, decision-makers underestimate the benefits that exceed the reference point; they also exaggerate the losses that fall below the reference point. This irrational psychology is more obvious when evaluating the performance evaluation of peers. As such, this paper proposes a cross-efficiency evaluation method based on prospect theory, which takes MOs as a reference point from a peer perspective. First, taking MOs as reference points, a decision-making unit (DMU) chooses a set of weights for each peer, in order to maximize or minimize the prospects of the peer, according to the benevolent or aggressive attitude of the DMU. In order to improve the adaptability of the method, the precise number of MOs is further extended to be an interval number. Finally, the relationship between models, which are based on precise MOs and interval MOs, is illustrated by propositions. Finally, numerical examples are provided to illustrate the applications of the proposed cross-efficiency evaluation method.

Keywords: Cross-efficiency evaluation; prospect theory; reference point; management objectives; peer perspective (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1142/S0217595921500408

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