An Interval Efficiency Measurement in DEA When considering Undesirable Outputs

Abstract

Data envelopment analysis (DEA) is a popular mathematical tool for analyzing the relative efficiency of homogenous decision-making units (DMUs). However, the existing DEA models cannot tackle the newly confronted applications with imprecise and negative data as well as undesirable outputs simultaneously. Thus, we introduce undesirable outputs into modified slack-based measure (MSBM) model and propose an interval-modified slack-based measure (IMSBM) model, which extends the application of interval DEA (IDEA) in fields that concern with less undesirable outputs. The novelties of the model are that it considers the undesirable outputs while dealing with imprecise and negative data, and it is slack-based. Furthermore, the model with undesirable outputs is proven translation-invariant and unit-invariant. Moreover, a numerical example is provided to illustrate the changes of the lower and upper bounds of the efficiency score after considering the undesirable outputs. The empirical results show that, without considering undesirable outputs, most of the lower bounds of the efficiency scores will be overestimated when the DMUs are weakly efficient and inefficient. The upper bound will also change after considering undesirable outputs when the DMU is inefficient. Finally, an improved degree of preference approach is introduced to rank the DMUs.