Cost and revenue efficiency in DEA-R models

• We formulated original DEA-R cost and revenue efficiency models.
• We analyzed relation between DEA and DEA-R cost/revenue efficiency models.
• Two theorems about DEA-R cost/revenue efficiency scores were formulated and proved.
• Theoretical findings were verified on the data set with a real background (21 DMUs).

One of the most important information given by DEA models is the cost and revenue efficiency of decision making units (DMUs). Cost efficiency is defined as the ratio of minimum costs to current costs, while revenue efficiency is defined as the ratio of maximum revenue to current revenue of the DMU. This paper aims to create models for the estimation of cost and revenue efficiency, with particular attention being paid to ratio DEA (DEA-R) models. This group of models eliminates some of the disadvantages associated with standard DEA models. The main contribution is the formulation of linear models for cost and revenue efficiency based on DEA-R models. The results given by the new models, as well as by the standard models are compared to a real data set – the evaluation of 21 medical centers in Taiwan.