Analysing policy effectiveness using cone restricted data envelopment analysis

Reducing weight flexibility has been suggested as a method for ensuring that the solution to data envelopment analyses do not give unreasonably low weightings to certain inputs or outputs. This paper extends the use of reducing weight flexibility and uses it to model the effects of the decision-making unit’s objectives on its efficiency relative to other DMUs with possibly different objectives. It shows how such an approach can identify situations in which the weights imputed by a data envelopment analysis can be inconsistent with the decision-making weights used by the firm, and how this approach can be used to provide efficiency measures that are consistent with the DMU’s own objectives. The method allows the analyst to distinguish between a decision-making unit’s technological inefficiency and its inability to implement its own policies.