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The efficiency analysis of two-stage dynamic interval DEA model incorporating cumulative prospect theory: an application to Indian airlines

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Abstract

The intrinsic features of decision-making units (DMUs) are overlooked by conventional radial data envelopment analysis (DEA) models, which measure the proportional change in inputs and outputs. Furthermore, traditional DEA models rely on exact, predictable, and non-negative input–output data, whereas real-world implementations are sometimes distinguished by findings that take the form of intervals incorporating negative data. This research addresses these challenges by introducing a dynamic network DEA model to deal with the internal structure. The two stages of a DMU are connected by the intermediate products, whereas the dynamic structure comprised of total T periods is linked by carryover activities. We quantify the lower bound and upper bound of the efficiency interval based on the decision-maker’s pessimistic and optimistic viewpoint, respectively. The next key aspect is to aggregate efficiency intervals in order to rank DMUs more thoroughly. Existing approaches for aggregating efficiency intervals, however, are based on traditional expected utility theory, which overlooks the possibility that when confronted with uncertainties, a decision-maker’s behavior may differ substantially from the traditional concept. To reflect the irrational behavioral aspects of decision-makers, we aggregate the interval efficiency of a DMU using the cumulative prospect theory risk criterion. A detailed numerical illustration and the output of the sample study are presented with the data of 11 Indian airlines across 4 years, from 2014 to 2018 to substantiate the proposed approach.

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Acknowledgements

The corresponding author, Sweksha Srivastava, is supported by the IPRF(vide letter no. GGSIPU/DRC /2022/1475). IPRF stands for Indraprastha Research Fellowship, which is granted by Guru Gobind Singh Indraprastha University in New Delhi, India. The fellowship is intended to support Ph.D. candidates in their research. The authors are thankful to the editor and the esteemed referees for their valuable suggestions to improve the quality of the paper.

Funding

The corresponding author, Sweksha Srivastava, is supported by the IPRF(vide letter no. GGSIPU/DRC /2022/1475). IPRF stands for Indraprastha Research Fellowship, which is granted by Guru Gobind Singh Indraprastha University in New Delhi, India. No other funding has been used for this study.

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Authors and Affiliations

  1. Department of Mathematics, Netaji Subhas University of Technology, Dwarka, New Delhi, 110078, India

    Pooja Bansal

  2. University School of Basic and Applied Sciences, Guru Gobind Singh Indraprastha University, Dwarka, Delhi, 110075, India

    Sweksha Srivastava & Abha Aggarwal

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  1. Pooja Bansal
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Correspondence to Sweksha Srivastava.

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Bansal, P., Srivastava, S. & Aggarwal, A. The efficiency analysis of two-stage dynamic interval DEA model incorporating cumulative prospect theory: an application to Indian airlines. Soft Comput (2023). https://doi.org/10.1007/s00500-023-09387-z

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