A rank ordering procedure in value efficiency analysis

Abstract

Basic data envelopment models are originally value-free, in the sense that they consider all input and output items of the same importance. Moreover, there is a similar scenario for the units under evaluation. However, there exist different approaches for incorporating the decision maker’s preferences into the evaluation model. One of the well-known models is value efficiency analysis, which assess the units in comparison with the most preferred one, assuming some properties of the value function. The model forms an optimistic shape of value frontier, and estimate the value efficiency of each unit based on their distance to this frontier. All the units located on the value efficient frontier are diagnosed as value efficient. In this paper, we propose a procedure for ranking all value efficient units. We illustrate the proposed model on a numerical example.