Abstract
The need to adapt Data Envelopment Analysis (DEA) and other frontier models in the context of negative data has been a rather neglected issue in the literature. A recent article in this journal proposed a variation on the directional distance function, a very general distance function that is dual to the profit function, to accommodate the occurrence of negative data. In this contribution, we define and recommend a generalised Farrell proportional distance function that can do the same job and that maintains a proportional interpretation under mild conditions.
Acknowledgements
We are grateful to two referees for most constructive comments. The usual disclaimer applies.
Notes
1 In fact, it is often ignored that the model proposed by CitationBanker et al (1984) does not satisfy the no free lunch axiom.
2 This important contribution is further discussed and contrasted with other proposals regarding negative data in CitationPastor and Ruiz (2007).