Terminal units in DEA: definition and determination

Applications of data envelopment analysis (DEA) models show that inadequate results may arise in some cases, two of these inadequacies being: (1) too many efficient units may appear in some DEA models; (2) a DEA model may show an inefficient unit from the point of view of experts as an efficient one...

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Bibliographic Details
Published in:Journal of productivity analysis 2015-04, Vol.43 (2), p.151-164
Main Authors: Krivonozhko, Vladimir E., Førsund, Finn R., Lychev, Andrey V.
Format: Article
Language:English
Subjects:
Accounting/Auditing
Data analysis
Data envelopment analysis
Econometrics
Economics
Economics and Finance
Financial institutions
Linear programming
Microeconomics
Operations Research/Decision Theory
Optimization algorithms
Shadow prices
Studies
Variables
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Summary:Applications of data envelopment analysis (DEA) models show that inadequate results may arise in some cases, two of these inadequacies being: (1) too many efficient units may appear in some DEA models; (2) a DEA model may show an inefficient unit from the point of view of experts as an efficient one. The purpose of this paper is to identify units that may unduly become efficient. The concept of a terminal unit is introduced for such units. It is shown by establishing theorems how units can be identified as terminal units. An approach for improving the adequacy of DEA models based on terminal units is suggested, and an example shown based on a real-life data set for Russian banks.
ISSN:0895-562X
1573-0441
DOI:10.1007/s11123-013-0375-6