Data Envelopment Analysis

Study Guide and Schedule for PhD Students

September 2020

Text Books:
Zhu, Joe, Data Envelopment Analysis: Let the Data Speak for Themselves
https://www.deafrontier.net/DEAtext2/index.html

Zhu, Joe, Quantitative Models for Performance Evaluation and Benchmarking: DEA with Spreadsheets, 3rd Edition, Springer, New York, 2014
ISBN 978-3-319-06646-2
https://www.deafrontier.net/spreadsheetsbooks.html

Overview
These two books provide the most elementary and prominent knowledge of DEA, its variants, methodologies, and applications. Let the Data Speak for
Themselves was designed to transform learners from “laymen” to “the initiated”, and Quantitative Models for Performance Evaluation and Benchmarking
will help readers enhance and expand their quantitative knowledge and skills, and develop a more comprehensive understanding of DEA. Therefore, it is
highly recommended that students study Let the Data Speak for Themselves first, followed by Quantitative Models for Performance Evaluation and
Benchmarking. You should pay attention to the “key points” listed in the schedules below, and “tasks” are questions you will need to answer. By the time you
finish studying, there will be a final project to test your ability in constructing and solving DEA models. Feel free to adjust the timeline according to your
digestion of the materials.

Zhu, Joe, Data Envelopment Analysis: Let the Data Speak for Themselves

Tentative schedule

Day Topics Key Points Tasks Supplemental Materials

1
1 Chapter 1 & Understand the basics of
Chapter 2 DEA and the multiplier
model.
2 Chapter 3 & For Chapter 3, understand
Chapter 4 efficiency, inputs, and
outputs. Know how to read
the graphical representation
of DEA and interpret the
best-practice frontier. For
Chapter 4, familiarize
yourself with input
improvements and output
reductions, and how to
determine the magnitude of
these
improvements/reductions
for a DMU.
3 Chapter 5 What are the inputs and
outputs selected for the
model in each of the three
case studies? What are the
variables? Which DMUs are
best practices?
4 Chapter 6 and Know how to construct a
Appendix virtual DMU by letting
existing DMUs collaborate,
and the difference between
the multiplier model and the
envelopment model.
1. Complete the laptop example. See file “cross evaluation” for an
2. Use the same dataset, complete example.
the DEA cross evaluation.
1. You need to be able to point out See “input CRS.xlsm” for an input
the differences between input and oriented CRS multiplier model.
output orientations and identify
the orientation of a model by
looking at it.
2. Try the input and output
oriented models in Chapter 4
respectively, and compute the
DEA model with dummy inputs or
outputs.
3. How to improve the
performance of a DMU?
1. Compute the DEA models in
the three case studies using Excel.
2. Identify the best practicing
DMUs and provide some
comments on the ones with lower
efficiency scores.
3. Provide some examples where
DEA can be used to assist decision
making.
1. Revisit and rebuild the airline
example from Chapter 5. 2. How
do you compose a virtual DMU?
3. What is an envelopment model
and what is its difference from the
multiplier model discussed in
2
 Chapter 1?
4. Download the DEAFrontier
software and try the CRS and VRS
models.

Zhu, Joe, Quantitative Models for Performance Evaluation and Benchmarking

Tentative schedule

Topics Key Points Tasks Supplemental Materials

1 Chapter Chapter 1 provides an introduction
1& to performance evaluation,
Chapter performance metrics and DMUs.
2 You should be acquainted with and
able to use these terms. Chapter 2
introduces slacks, and the input
and output oriented envelopment
models. By the end of Chapter 2,
you should be able to calculate
slacks and formulate the input and
output oriented VRS model in
Excel. Chapter 2 also introduces
the OpenSolver which is a great
free add-in for DEA calculations in
Excel.
2 Chapter For Chapter 3, understand the
3& weight restrictions in multiplier
Chapter models. For chapter 4, understand
4 the difference between cross-
efficiency and regular DEA
efficiency.
1. DEA has two forms, the See “slack.xlsm” for an example of
envelopment form and the slack measure calculation.
multiplier form. What is CRS and
what is VRS? Can they both be
manifested in both the
envelopment model and the
multiplier model? 2. What are the
two properties of DEA as defined
in Chapter 1? 3. Explain what each
letter represents in Model 2.1 and
Model 2.5. Identify the variables,
constants and data that are already
known. 4. Explain what a "slack"
is and calculate slack measures
according to Model 2.3.
1. In Model 3.1, what is ε and why See “cross evaluation.xlsm” for an
is it needed? 2.You have done the example.
input-oriented CRS multiplier
model in the first book. Now try
the assurance region (AR) model
for input-oriented CRS/VRS
multiplier model. 3. How is cross-

3

3 Chapter For Chapter 5, the goal is to
5& understand the additive slack-
Chapter based DEA model. For Chapter 6,
6 know the properties of the
measure-specific models and their
differences from the regular DEA
models.
4 Chapter Non-radial measures (Fare and
7& Lovell, 1978) allow non-
Chapter proportional reductions in positive
8 inputs and improvements in
positive outputs. Why are they
important? Also understand the
efficiency different from regular
DEA evaluations? You have done
the cross efficiency evaluation of
the laptop example, now try
calculating the input oriented game
efficiency using the dataset in
Table 4.1
1. In an input-oriented CRS slack-
based DEA model, what would
your objective function be (i.e.
minimize/maximize what)? How
do you decide which DMUs are
efficient, and which ones are not?
2. Formulate and solve the slack-
based DEA model in figure 5.1. 3.
How are measure-specific models
different from regular DEA
models? 4. In the analysis of the
fortune 400 companies, the author
obtained the VRS best-practice
frontier for the efficient DMUs. In
order to evaluate the inefficient
DMUs, the author used a measure
specific model. Would the
measure-specific model yield the
same frontier or not?
1. Calculate the preference
structure model in Model 7.2. 2.
What is multiple objective linear
programming (MOLP)? Try the
input and output oriented MOLP
models in Chapter 7.4 and pay
4
 preference structure of a DEA
model and its importance.
5 Chapter Does adding or deleting an
9& inefficient DMU affect the
Chapter efficiency scores of other DMUs?
10 Does it change the best-practice
frontier? The answer is no to both
questions. However, would adding
or deleting an efficient DMU
change the answer? Context-
dependent DEA allows users to
evaluate the relative attractiveness
of DMUs in a DEA model. Super
efficiency is another important
concept. What would happen if
you remove the DMU under
evaluation from the reference set
of an envelopment model? Super
efficiency models are used to study
the sensitivity of efficiency and
locate the efficiency stability
regions.
6 Chapter Understand the basics of
s 12 & benchmark models, and returns to
13 scale
attention to the non-orientation
special case.
1. Formulate and compute the See “super efficiency.xlsm” for
specification DEA model using the guidance on how to set up and
data in Table 9.1 2. Compute the calculate DEA super efficiencies.
input and output oriented context-
dependent DEA models, including
first degree and second degree
attractiveness. 2. What is the
difference between local targets
and global targets?
3. In Model (9.1), what is the
purpose of introducing the two
new parameters, l and k? What is
the range of l and how is it
determined? 4. Compute the input-
oriented CRS super efficiency
model. Just by looking at the data,
what is one way to determine
whether this model is feasible or
infeasible (Hint: Refer to Chapter
10.4)?
1. According to Chapter 12, what
is benchmarking? What are some
benchmarking DEA models?
Please complete the calculations of
the input-oriented CRS variable-
benchmarking model using the
data presented in Table 12.2. 2.
What is a fixed-benchmark model
and what is its difference from the
variable-benchmark model? Use
5

7 Chapter Understand the basics of two-stage
14 models.
8 Chapter Can you set up DEA models for
18 data that are not exact (i.e. interval
data or ordinal data)? The solution
is called imprecise DEA (IDEA).
In fact, you can convert many
forms of such data into a set of
exact data. Chapter 18 discusses
the detailed steps. Chapter 19
introduces the DEAFrontier
the data in Table 12.2 to calculate
the output oriented CRS variable-
benchmark model. 3. Explain
returns-to-scale (RTS) and RTS
regions. Briefly describe the basic
process for estimating the
prevalent RTS in a VRS multiplier
model. Set up the spreadsheet RTS
estimation as in Figure 13.4 and
complete the calculations.
1. What is a two-stage model? See “sample 2 staged.xlsm” for an
Compute the VRS two-stage example of a two-staged model,
model. 2. Calculate the VRS two- using the centralized method.
stage model 14.1. 3. What are the
different types of two-stage CRS
model discussed in this chapter?
Please describe in words some
major distinctions/differences
between the CRS centralized
model and the CRS leader-
follower model in terms of
computation. 4. If you have an
interest, please study chapter 15.
Read through the entire Chapter
and try the models in Excel if you
can. No specific task is assigned.
6
 Software.

Final Project: Build a Two-Stage Network DEA using Excel Solver and VBA
Tasks:
1. Read the paper published in OMEGA.
Li, Y., Yao Chen, L. Liang, and J. Xie, DEA Models for Extended Two-stage Network Structures, OMEGA, 40 (2012) 611-618. Before you attempt to
build the models in Excel, you should understand the models.
2. You need to solve models (3), (5), (6) and (8), and generate Figure 4.
3. You need to solve model (5) for all DMUs, not just Zhejiang (DMU26)
4. You need to obtain the solutions for all DMUs. This requires you use at least two nested loops via VBA. Detailed instructions are provided in the last
page.
5. You also need to solve the models using opensolver.