Data Envelopment Analysis Using Virtual DMU as Intermediates : An Application to Business Analysis of Japan's Automobile Manufacturers

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In conventional data envelopment analysis (DEA), there are cases where the decision making units (DMUs) that cannot be considered efficient according to past experience are determined as DEA-efficient. This paper proposes a DEA using virtual DMU as intermediates (DEA/Virtual DMU Analysis) to conduct evaluations in accordance with the evaluator's senses. Under the proposed method, the evaluator's a priori information is materialized as virtual DMUs and added to the real DMU set for the purpose of analysis. Accordingly, this method enables the evaluator to determine whether the DMUs satisfy the activity level presupposed by the evaluator, thereby making it possible to reflect the results on DEA-efficiency values. This paper also introduces an application of the proposed method to business analysis of Japan's automobile manufacturers in order to demonstrate the effectiveness of the method.

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