An epsilon-based measure of efficiency in DEA

Firstly, we discuss differences between Farrell and Pareto-Koopmans efficiency measures in DEA, and propose a composite method for discriminating them. Then, we extend the method to so-called “epsilon based-measure (EBM).” The EBM can examine the robustness and stability of efficiency measure of DMUs regarding parametric change of input multiplier variables. Lastly, we propose a scheme for selecting an appropriate value of epsilon with recourse to actual cost shares of input resources.