Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 04/2011: Terminal units in DEA: Definition and Determination

Vladimir Krivonozhko, Finn R. Førsund () and Andrey V. Lychev
Additional contact information
Vladimir Krivonozhko: Institute for Systems Analysis, Russian Academy of Sciences, Moscow
Finn R. Førsund: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Andrey V. Lychev: Accounts Chamber of the Russian Federation, Moscow

Abstract: Applications of the DEA models show that inadequate results may arise in some cases, two of these inadequacies being: a) too many efficient units may appear in some DEA models; b) a DEA model may show an inefficient unit from the point of view of experts as an efficient one. The purpose of this paper is to identify units that may unduly become efficient. The concept of a terminal unit is introduced for such units. A method for improving the adequacy of DEA models based on terminal units is suggested, and an example shown based on a real-life data set for Russian banks.

Keywords: Terminal units; DEA; Efficiency; Weight restrictions; Domination cones

JEL-codes: C44; C61; C67; D24

27 pages, February 17, 2011

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Published as
Vladimir Krivonozhko, Finn R. Førsund and Andrey V. Lychev, (2015), 'Terminal units in DEA: Definition and Determination', Journal of productivity Analysis, vol 43, no 1, pages 151-164

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