Cost Efficiency for Systems with Nonlinear Outputs

Data envelopment analysis (DEA) is a method for estimating efficiency of decision making units (DMUs) by means of the weighted output to input ratio with the weights are being optimal virtual prices of such activities for all units. In conventional DEA all variables are usually behaving in linear manner, however, all data can’t generally be assumed to be in linear form. In order to generalize further the concept of cost efficiency, the classical cost efficiency (CE) method may be extended to model with nonlinear output and the paper describes this extension in details. The application of the proposed model is finally illustrated by a numerical example with the mix linear and nonlinear outputs.