Extensions of Modified DEA

Andersen and Petersen (1993) presented an extension of the basic DEA methodology, called modified DEA, which has the desirable feature of ranking not only the inefficient DMUs, but the e ficient ones as well. However, when their basic approach is extended to the cases of variable returns to scale and non-discretionary inputs, several conceptual problems arise. This paper addresses these problems, and illustrates the proposed extensions to the modified DEA method using data from a major U.S. bank.