The Directional Distance Function and Measurement of Super-Efficiency: An Application to Airlines Data

Subhash Ray

No 2004-16, Working papers from University of Connecticut, Department of Economics

Abstract: Lovell and Rouse (LR) have recently proposed a modification of the standard DEA model that overcomes the infeasibility problem often encountered in computing super-efficiency. In the LR procedure one appropriately scales up the observed input vector (scale down the output vector) of the relevant super-efficient firm thereby usually creating its inefficient surrogate. An alternative procedure proposed in this paper uses the directional distance function introduced by Chambers, Chung, and Fare and the resulting Nerlove-Luenberger (NL) measure of super-efficiency. The fact that the directional distance function combines features of both an input-oriented and an output-oriented model, generally leads to a more complete ranking of the observations than either of the oriented models. An added advantage of this approach is that the NL super-efficiency measure is unique and does not depend on any arbitrary choice of a scaling parameter. A data set on international airlines from Coelli, Perelman, and Griffel-Tatje (2002) is utilized in an illustrative empirical application.

Pages: 15 pages
Date: 2004-05
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Citations: View citations in EconPapers (1)

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Journal Article: The directional distance function and measurement of super-efficiency: an application to airlines data (2008)
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