Efficiency analysis accounting for internal and external non-discretionary factors

A. S. Camanho*, M. C. Portela, C. B. Vaz

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

47 Citations (Scopus)
31 Downloads

Abstract

This paper develops a method based on data envelopment analysis (DEA) for efficiency assessments taking into account the effect of non-discretionary factors. A typology that classifies the non-discretionary factors into two groups is proposed: the factors that characterize the external conditions where the decision making units (DMUs) operate (external factors), and the factors that are internal to the production process but cannot be controlled by the decision makers (internal factors). This paper proposes an enhanced DEA model that accommodates non-discretionary inputs and outputs and treats them differently depending on their classification as internal or external to the production process. This generalized model integrates the previous approaches for dealing with non-discretionary variables described in the DEA literature. The model defines the efficient frontier based exclusively on the discretionary variables and internal non-discretionary factors, but the potential peers of each DMU are restricted to other units facing comparable external conditions (represented by the external non-discretionary factors). The peer selection criteria implemented in the DEA model is informed by decision makers' opinion. The applicability of the model developed is illustrated with a real-world assessment of retailing stores.

Original languageEnglish
Pages (from-to)1591-1601
Number of pages11
JournalComputers and Operations Research
Volume36
Issue number5
DOIs
Publication statusPublished - May 2009

Keywords

  • Data envelopment analysis
  • Non-discretionary factors
  • Retailing

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