A variant of radial measure capable of dealing with negative inputs and outputs in data envelopment analysis

Gang Cheng, Panagiotis Zervopoulos and Zhenhua Qian

MPRA Paper from University Library of Munich, Germany

Abstract: Data envelopment analysis (DEA) is a linear programming methodology to evaluate the relative technical efficiency for each member of a set of peer decision making units (DMUs) with multiple inputs and multiple outputs. It has been widely used to measure performance in many areas. A weakness of the traditional DEA model is that it cannot deal with negative input or output values. There have been many studies exploring this issue, and various approaches have been proposed. In this paper, we develop a variant of the traditional radial model whereby original values are replaced with absolute values as the basement to quantify the proportion of improvements to reach the frontier. The new radial measure is units invariant and can deal with all cases of the presence of negative data. In addition, the VRM model preserves the property of proportionate improvement of a traditional radial model, and provides the exact same results in the cases that the traditional radial model can deal with. Examples show the advantages of the new approach.

Keywords: Data Envelopment Analysis; Negative data in DEA; Variant of radial measure; Unit invariance (search for similar items in EconPapers)
JEL-codes: C02 C61 C67 (search for similar items in EconPapers)
Date: 2011-05-17
New Economics Papers: this item is included in nep-ecm and nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/41752/2/MPRA_paper_41752.pdf revised version (application/pdf)

Related works:
Journal Article: A variant of radial measure capable of dealing with negative inputs and outputs in data envelopment analysis (2013)
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