DEA-based competition strategy in the presence of undesirable products: An application to paper mills

Abstract

In real applications of data envelopment analysis (DEA), there are cases in which undesirable outputs are produced along with desirable outputs in such a way that the total sum of the produced undesirable outputs over the production units must be fixed and constant. In this case, a trade-off between the decision making units (DMUs) is needed to balance the production of undesirable outputs. In a rational sight, this trade-off is done in such a way that all DMUs improve their relative performances. In this paper, a single DEA-based model is proposed to model fixed and variable-sum undesirable outputs in production processes. A common equilibrium efficient frontier is constructed and after reallocating the input/output factors, all decision making units (DMUs) prevail as efficient. A real case of 32 paper mills in China is given. The analysis results demonstrated that some economically developed paper mills have better performance than less developed paper mills; in particular, all efficient paper mills are the developed ones.