An analytic hierarchy process and data envelopment analysis methodology for ranking decision making units

An analytic hierarchy process and data envelopment analysis methodology for ranking decision making units

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Article ID: iaor20012455
Country: United Kingdom
Volume: 7
Issue: 2
Start Page Number: 109
End Page Number: 124
Publication Date: Mar 2000
Journal: International Transactions in Operational Research
Authors: , ,
Keywords: statistics: data envelopment analysis, analytic hierarchy process
Abstract:

This paper presents a two-stage model for fully ranking organizational units where each unit has multiple inputs and outputs. In the first stage, the Data Envelopment Analysis (DEA) is run for each pair of units separately. In the second stage, the pairwise evaluation matrix generated in the first stage is utilized to rank scale the units via the Analytical Hierarchical Process (AHP). The consistency of this AHP/DEA evaluation can be tested statistically. Its goodness of fit with the DEA classification (to efficient/inefficient) can also be tested using non-parametric tests. Both DEA and AHP are commonly used in practice. Both have limitations. The hybrid model AHP/DEA takes the best of both models, by avoiding the pitfalls of each. The nonaxiomatic utility theory limitations of AHP are irrelevant here: since we are working with given inputs and outputs of units, no subjective assessment of a decision maker evaluation is involved. AHP/DEA ranking does not replace the DEA classification model, rather it furthers the analysis by providing full ranking in the DEA context for all units, efficient and inefficient.

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