Regret cross-efficiency evaluation using attitudinal entropy approach

Abstract

Abstract Data envelopment analysis (DEA) is a popular nonparametric tool for measuring the performance of decision making unit (DMU). Cross-efficiency evaluation is an efficient means to rank DMUs, which compensates for efficiency overestimation and incomplete ranking of conventional DEA models. With respect to incomplete rational cross-efficiency evaluation, the common methods construct models with two extreme efficiencies as reference, such as efficiency values of the aggressive and benevolent models. In addition, they only explore the irrational preferences of decision maker (DM) at a certain stage in the evaluation process. They fail to investigate the cross-efficiency evaluation synthetically under incomplete rationality and characterize the complexity of the individuals’ decision making. To fill this gap, a new method must be proposed. This paper proposes a new cross-efficiency termed regret cross-efficiency model using attitudinal entropy approach (RACE), which constructs a secondary goal model from a comprehensive perspective under the framework of regret theory, and introduces attitudinal entropy to aggregate the cross-efficiencies. Besides, this paper presents some empirical examples to illustrate the validity and robustness of the RACE method.