The pitfalls of using ratio-form indices in Data envelopment analysis

In many applications of data envelopment analysis, the ratio form of inputs and outputs instead of absolute form have been used. In other words some of inputs and outputs have been defined as a ratio of indicators. This may be necessary because of the nature of the data available. The unavailability of absolute data may force the decision maker to apply the inputs and outputs indices in the ratio form. For example the rate of successful treatment in a hospital may be used as an output or cost per employee in a factory may be used as an input. Using these kinds of indices for assessing the efficiency of DMUs by common DEA models leads to invalid efficiency scores. This paper discusses about the topic of ratio form indices and the pitfalls of applying them in DEA models. Then some of solutions will be presented to deal with ratio indices