Article
A new method for detecting outliers in Data Envelopment Analysis
Data Envelopment Analysis (DEA) is a computationally convenient way to measure efficiency that does not require an explicit functional relationship between inputs and outputs. However, because the frontier is constructed using extreme observations, DEA can be sensitive to extreme points, especially when data may be contaminated by measurement error. In such settings, the technical efficiency scores calculated from datasets that include outliers can be misleading. Timmer (1971) was among the first to recognize the potential sensitivity of computed technical efficiency measures to outliers when linear programming techniques are used to measure efficiency. In other settings, outliers may simply represent outcomes observed accurately, but with low frequency, and hence, worthy of further investigation
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