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Introduction to Data Envelopment Analysis

Data Envelopment Analysis (DEA) is a performance measurement technique for assessing the efficiency of Decision-Making Units (DMUs) across various sectors. It utilizes multiple inputs and outputs to calculate efficiency scores and identify best practices, with models like CCR and BCC catering to different return scales. Despite its advantages, DEA has limitations such as sensitivity to outliers and the impact of noisy data on results.

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7 views

Introduction to Data Envelopment Analysis

Data Envelopment Analysis (DEA) is a performance measurement technique for assessing the efficiency of Decision-Making Units (DMUs) across various sectors. It utilizes multiple inputs and outputs to calculate efficiency scores and identify best practices, with models like CCR and BCC catering to different return scales. Despite its advantages, DEA has limitations such as sensitivity to outliers and the impact of noisy data on results.

Uploaded by

Shubham
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Introduction to Data Envelopment Analysis (DEA)

1. What is DEA?

Data Envelopment Analysis (DEA) is a performance measurement technique used to assess the efficiency of

Decision-Making Units (DMUs), such as businesses, hospitals, or transportation systems.

2. Applications of DEA

1. Efficiency analysis in banking, healthcare, education, and transport.

2. Benchmarking and identifying best practices.

3. Allocating resources efficiently.

4. Environmental and sustainability performance.

3. Key Concepts

1. Input and Output: DEA evaluates units based on multiple inputs and outputs.

2. Efficiency Score: A ratio comparing weighted outputs to weighted inputs.

3. Frontier: Represents best-performing units (efficient frontier).

4. Types of DEA Models

1. CCR Model (Charnes, Cooper, and Rhodes): Assumes constant returns to scale.

2. BCC Model (Banker, Charnes, and Cooper): Assumes variable returns to scale.

3. Slack-Based Measure (SBM): Accounts for input excesses and output shortfalls.

5. Advantages of DEA

1. Handles multiple inputs and outputs without a predefined functional form.

2. Identifies benchmarks and improvement targets.

3. Useful for performance improvement and decision making.

6. Limitations of DEA

1. Sensitive to outliers.
Introduction to Data Envelopment Analysis (DEA)

2. Noisy data may distort results.

3. Does not account for statistical noise.

7. Conclusion

DEA is a powerful tool for analyzing efficiency, particularly when multiple input and output factors are

involved. It is widely used in operations research, economics, and management sciences.

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