Theoretical perspectives of trade-off analysis using data envelopment analysis

Theoretical perspectives of trade-off analysis using data envelopment analysis

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Article ID: iaor2008508
Country: United Kingdom
Volume: 34
Issue: 4
Start Page Number: 337
End Page Number: 343
Publication Date: Aug 2006
Journal: OMEGA
Authors: , ,
Keywords: sensitivity analysis
Abstract:

Because of the piecewise linear nature of the frontier in data envelopment analysis (DEA), estimated marginal rates of substitution are only valid for infinitesimal, or small finite, changes in one or more variables. Analysing the impacts of very small changes is not adequate for many situations, where the consequences of substantial changes in variables are of interest to for instance managers. This paper develops methods for evaluating larger, i.e. non-marginal, tradeoffs between variables in DEA. The methods are capable of handling both scalar and additive changes. Finally, the approaches for evaluating basic pairwise tradeoffs are generalised in order to enable assessment of the impact on one or more throughputs of the change in one or more of the other throughputs.

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