Mathematical Programming Approach for Measuring Technical Efficiency

There has been an ever growing concern to measure efficiency of decision making units (DMUs). Parametric approaches have been the popular methods for measuring the same. Data Envelope Analysis (DEA) is an addition in this domain. This paper is an attempt to understand the concept of DEA approach. DEA is a Linear Programming Problem that provides a means of calculating apparent efficiency levels within a group of organizations. The efficiency of an organization is calculated relative to the group’s observed best practice. In other words, we may say that, DEA is essentially an optimization algorithm, which develops efficiency scores for all DMUs on a scale from zero to hundred percent.