On centralized resource utilization and its reallocation by using DEA

Abstract

The standard DEA model allows different DMU units to set their own priorities for the inputs and outputs that form part of the efficiency assessment. In the case of a centralized organization with many outlets, such as an education authority that is responsible for many schools, it may be more sensible to operate in the most efficient way, but under a common set of priorities for all DMUs. The algorithm that is used to do this, the centralized resource allocation model, does just this. We show that the centralized resource allocation model can be substantially simplified and we interpret the simplifications and show how the model works using real data of Spanish public schools. Apart from finding the best way to reallocate resource among the schools, it is shown that the most desirable operating unit is found to be a by-product of the estimation. This is useful information when planning new schools.