Terminal units in DEA: definitions and determination

Finn Førsund, Vladimir E. Krivonozhko, and Andrej Lychev

Journal of Productivity Analysis

Photo: Springer

Published in:

Journal of Productivity Analysis 2015 43 (2) pp.151-164.

DOI: 10.1007/s11123-013-0375-6

Abstract:

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.

Published Sep. 23, 2015 2:18 PM - Last modified Dec. 16, 2015 3:00 PM