Using the DEA-R model in the hospital industry to study the pseudo-inefficiency problem

Abstract

Because of the unreasonable and unnecessary weight restriction assumption, a barely noticeable deficiency in pseudo-inefficiency occurs at times when applying a CCR model. The CCR was the first model designed for Data Envelopment Analysis (DEA); it remains its most popular model. To detect this type of unobvious deficiency, this study compared the following; the efficiency score and optimal weight set of an input oriented CCR model (CCR-I); the model with a weight restriction assumption; an input-oriented ratio-based DEA model (DEA-R-I); and the model without it. In this case study of hospitals, pseudo-inefficiency was discovered and the reason behind it determined. Further, this study proved that the DEA-R-I is a valid model. Because DEA-R-I is valid and without a weight restriction assumption, this study puts forward the DEA-R-I as a capable substitutive model for CCR-I in order to avoid pseudo-inefficiency. (C) 2010 Elsevier Ltd. All rights reserved.