DEA-R: ratio-based comparative efficiency model, its mathematical relation to data envelopment analysis and its use in applications

We propose a new mathematical model for efficiency analysis, which combines DEA methodology with an old idea – Ratio Analysis. Our model, called DEA-R, treats all possible ratios ‘output/input’ as outputs within the standard DEA model. Although DEA and DEA-R generate different summary measures for efficiency, the two measures are comparable. Our mathematical and empirical comparisons establish the validity of DEA-R model in its own right. The key advantage of DEA-R over DEA is that it allows effective integration of the model with experts' opinions via flexible restrictive conditions on individual ‘output/input’ pairs.