Data envelopment analysis, cost efficiency and performance targetting

Abstract

This paper extends data envelopment analysis so that it incorporates cost and spatial considerations as well as explicit performance targets. The standard envelopment problem and multiplier model are shown to be special cases of a more comprehensive performance target and replacement cost related analysis in which tradeoffs between performance targets as weil as the catchment areas for decisionmaking units are endogenously determined. In this more general framework outputs of decisionmaking units may optimally replace or be replaced by those of others on a replacement cost basis. This may lead among other things to optimally determined redefinitions of catchment areas for some or all activities undertaken.

Key Words:

• Data envelopment analysis
• cost efficiency
• multi-objective goal programming