I am doing Masters in Development Economics at Hiroshima University, Japan. My methodology for my master's thesis is DEA. But I am not familiar with it before. I want to understand it in an easy way. I already searched at Google and found some ideas but not clear already the actual idea of DEA. Now, can anyone give me some appropriate guidelines or links about DEA to understand the theory easily and, is there any recent development of DEA?
I have some questions on DEA method. Expert suggestions needed.
1. We are measuring efficiency by the ratio of the summation of weight multiplied by output and input, respectively. So my question is that, actually how it works for efficiency measurement only taking summation? what is the validity behind it? and also, what is its advantage?
2. Is it works for a different to different unit for outputs and inputs such as output variables unit is currency and input variables unit is number?
3. Is this method finds or consider any Gap among firm's outputs and inputs for performing the analysis?
Experts suggestions needed. Thanks in Advance.
Here are some suggestions:
1. We are measuring efficiency by the ratio of the summation of weight multiplied by output and input, respectively. So my question is that, actually how it works for efficiency measurement only taking summation? what is the validity behind it? and also, what is its advantage?
Answer: If you look at how the procedure works in a linear programming (LP) context, you will see that the model uses sumproduct (multiply two vectors and then sum them) in order to maximize the efficiency.
2. Is it works for a different to different unit for outputs and inputs such as output variables unit is currency and input variables unit is number?
Answer: The units should be the same.
3. Is this method finds or consider any Gap among firm's outputs and inputs for performing the analysis?
Answer: Use any standard measure for the gap. If it is an outlier, then simply leave it out. You can try an interpolation, average between the two year that contain the gap. Or you might use the median. Do several alternative and see what impact it has on the efficiency.
Dear Syed Mohammad Sadat,
A1. Different inputs and outputs have different preferences, so they should be considered with different input and output weight in the definition. This can be an interpretation plus from the mathematical theory behind, the weights can not be ignored!
A2. Inputs are the ones that we are in favor of using them as less as possible and outputs, of producing them as mush as possible, so it depends on the context you are applying DEA. There are very important issues that how we choose inputs and outputs. For example, CO2 is an output of a factory, but who is interested to maximize it? So this is defined as undesirable outputs and they should be behaved in another way. From this example you can see how problematic can be the choice of variables because the wrong choice will provide completely wrong results. You should refer to the literature in this case. Be careful with your choice.
I did not understand your third question.
Good Luck
Dear Syed Mohammad Sadat,
Take a look at these two references, you will find all the answers you need .
1- ROLF FÄRE, SHAWANA GOSSKOPF, & C.A. KNOX LOVELL, Production Frontiers.
2- ROLF FÄRE, DANIEL PRIMONT, Multi-Output Production and Duality Theory and Apllications.
Good Luck
Dear Freinds,
There is an excelent free software to estimate efficiency frontier. I'm talking about EMS (Efficiency Measurement System), for academic use only.
- Badges
- Science topic
- Similar topics
- Linguistics
- Composition Studies
- Publication