HIERARCHIES AND GROUPS IN DEA

Conventional applications of data envelopment analysis (DEA) presume t he existence of a set of similar decision making units, wherein each u nit is evaluated relative to other members of the set. Often, however, the DMUs fall naturally into groupings, giving rise first to the prob lem of how to view the groups themselves as DMUs, and second to the is sue of how to deal with several different ratings for any given DMU wh en groupings can be formed in different ways. In the present paper we introduce the concept of hierarchical DEA, where efficiency can be vie wed at various levels. We provide a means for adjusting the ratings of DMUs at one level to account for the ratings received by the groups ( into which these DMUs fall) at a higher level. We also develop models for aggregating different ratings for a DMU arising from different pos sible groupings. An application of these models to a set of power plan ts is given.