Additional applications

Application 1.1

Consider a company in the business of buying and selling a product. The cash available is Rs
8000. They have a warehouse that can store a maximum of 250 items. The initial inventory
they have is 180. They sell items in the beginning of the period but the amount is realized at
the end of the period. They can buy with the money available at the beginning of the period.
The buying prices for six periods are 50, 50, 55, 60, 60, 65 and selling prices are 50, 55, 60,
65, 65, and 68 respectively. Find the buying and selling quantities that maximize the net
profit?

The company also incurs an inventory holding cost that is charged at Rs 3/unit on the ending
inventory. The demands (selling quantities) are also to be limited to 200 in each period.

This problem is a slight variant of the problem discussed in Charnes (19xx). The decision
variables are as follows:

Let Xj represent the quantities bought in period j. Let Yj represent the quantities sold in
period j.
There are three sets of constraints one that limits on the quantities sold; the other on the
capacity of the warehouse and the third that limits the quantity purchased. The objective is to
maximize the net revenue. The formulation is

Maximize 50Y1+55Y2+60Y3+65Y4+65Y5+68Y6-50X1-50X2-55X3-60X4-60X5+65X6 subject

to
X1-Y1 70
X1+X2-Y1-Y270
X1+X2+X3-Y1-Y2-Y3 70
X1+X2+X3+X4-Y1-Y2-Y3-Y4 70
X1+X2+X3+X4+X5-Y1-Y2-Y3-Y4-Y5 70
X1+X2+X3+X4+X5+X6-Y1-Y2-Y3-Y4-Y5-Y6 70
-X1+Y1+Y2 180
-X1-X2+Y1+Y2+Y3 180
-X1-X2-X3+Y1+Y2+Y3+Y4 180
-X1-X2-X3-X4+Y1+Y2+Y3+Y4+Y5 180
-X1-X2-X3-X4-X5+Y1+Y2+Y3+Y4+Y5+Y6 180
50X1 8000
50X1+50X2-50Y1 8000
50X1+50X2+55X3-50Y1-55Y2 8000
50X1+50X2+55X3+60X4-50Y1-55Y2-60Y3 8000
50X1+50X2+55X3+60X4+60X5-50Y1-55Y2-60Y3-65Y4 8000
50X1+50X2+55X3+60X4+60X5+65X6-50Y1-55Y2-60Y3-65Y4-65Y5 8000
The first six constraints restrict the inventory in the warehouse at the end of each period to
250. The first constraint is 180 + X1 Y1 250. The remaining constraints aggregate the
bought and sold quantities to compute the ending inventory. The next six constraints ensure
that the quantities sold are not more than the quantities available. For example in the second
period, we would have a constraint Y1 + Y2 180 + X1. This takes into account the ending
inventories. Similarly, the third set of six constraints ensures that there is sufficient money
available for the quantities purchased.

The optimum solution is X1 = 160, X2 = X3 = 90, X4 = 109.23, X5 = 250, Y1 = Y2 = 90, Y3 =

Y5 = 109.23, Y4 = 230.77, Y6 = 250 with revenue = 16100.

We observe that we do not have an integer solution because we have defined the variables to
be continuous. We now define the variables to integers and obtain the optimum solution X1 =
160, X2 = X4 = 109, X3 = 231, X5 = 250, Y1 = Y2 = 90, Y3 = Y5 = 109, Y4 = 231, Y6 = 250
with revenue = 16100.

This shows that the LP had alternate optima with one of the optimum solution integer valued.
When we restricted the variables to integers, this solution was provided.

We consider the cost of holding the ending inventory. The ending inventory quantities are
180 + X1 Y1, 180 + X1 + X2 Y1 Y2, 180 + X1 + X2 + X3 Y1 Y2 Y3, X1 + X2 + X3 +
X4 Y1 Y2 Y3 Y4 and X1 + X2 + X3 + X4 + X5 Y1 Y2 Y3 Y4 Y5. We expect the
ending inventory for the sixth period to be zero since all the units would have been sold. The
cost of inventory that is to be subtracted from the objective function is 15X1 + 12X2 + 9X3 +
6X4 + 3X5 15Y1 12Y2 9 Y3 6Y4 3Y5 2700.

We subtract the cost term from the objective function (temporarily leave out the constant) and
solve the problem optimally (along with the integer restriction). The optimum solution is
given by X2 = 250, X3 = 90, X4 = 109, X5 = 250, Y1 = Y2 = 90, Y3 = 109, Y4 = 231, Y5 = 109,
Y6 = 250 with revenue = 16010. We subtract 2700 to get revenue of 13310. We show the
various costs and the revenues in Table 1.28.

Table 1.28 Costs and revenues

Period Initial Purchased Cost Sold Money Ending
inventory incurred earned inventory
and cost
1. 180, 8000 0 0 90 4500 90
2. 90, 12500 250 12500 90 4950 250
3. 250, 4950 90 4950 109 6540 231
4. 231, 6540 109 6540 231 15015 109
5. 109,15015 250 15000 109 7085 250
6. 250, 7100 0 0 250 17000 24100
The total units held in ending inventory for five periods is 930 and the cost of inventory is
2790. The revenue earned is 24100 2790 8000 = 13310.

If we consider the restriction that the maximum that can be sold is 200 units in a period, we
have to add six constraints Yj 200 for j = 1,..,6. The optimum solution now becomes X2 =
250, X3 = 90, X4 = 140, X5 = 200, Y1 = Y2 = 90, Y3 = 140, Y4 = 200, Y5 = 140, Y6 = 200 with
revenue = 15760. We subtract 2700 to get revenue of 13060.
Application 1.2
A person wishes to buy a car and wishes to evaluate few existing models based on three
parameters price, mileage and popularity. The price is in Rs/car, mileage is in Km/litre
while the popularity is in % usage. He uses data from a recent survey from 1000 car owners
and computes the percentage among the users of these cars. The data is given in Table 1.29

Table 1.29 Data for application 1.2

Model Price Mileage Popularity
A 9 20 12
B 8 18 18
C 6 16 24
D 5 18 31
E 10 14 15

Based on the data he gives preferences. A maximum of 10 pair wise preferences are possible.
He gives eight preferences. These are (A, B), (A, D), (C, B), (E, A), (B, D), (D, C), (E, C),
(D, E). Assume that the set of parameters for each model is a point and that the persons
ideal car has coordinates (x, y, z). Also assume that the preference (A, B) implies that A is
preferred to B and indicates that the distance between A and the ideal point is less than or
equal to the distance between B and the ideal point. Find the coordinates of the ideal point
such that the inequalities are satisfied to the maximum.

Consider that the ideal point is bounded by the coordinates of the given points.

Let X = (x, y, z) represent the coordinates of the ideal point. There are eight pair wise
preferences. The preference (A, B) indicates that the distance between A and the ideal point
is less than or equal to the distance between B and the ideal point. Consider the preference (i,
j). Let the coordinates of point i be a(i,1), a(i,2) and a(i,3). We have

d X ,i d X , j
(a(i,1) x)2 (a(i, 2) y)2 (a(i,3) z) 2 (a( j,1) x) 2 (a( j, 2) y) 2 ( a( j, 2) z) 2
This on simplification gives
2 x(a( j,1) a(i,1)) 2 y(a( j, 2) a(i, 2)) 2 z (a( j,3) a(i,3))
a( j,1) 2
a(i,1) 2 a( j, 2) 2 a(i, 2) 2 a( j,3) 2 a(i,3) 2

This is rewritten as

2 x(a( j,1) a(i,1)) 2 y(a( j, 2) a(i, 2)) 2 z( a( j,3) a(i,3)) a( j, k ) 2 a(i, k ) 2

3

k 1

This inequality is converted to an equation by the addition of an unrestricted variable written

as the difference of two non negative variables. This is given by
2 x(a( j,1) a(i,1)) 2 y(a( j, 2) a(i, 2)) 2 z (a( j,3) a(i,3)) pl ql a( j, k ) 2 a(i, k ) 2
3

k 1

There are eight constraints for l = 1, 8.

The inequalities as satisfied if yl = 0 and are violated if yl > 0. The objective function is to
ensure that the satisfied to the extent possible which means that they are violated as less as
8
possible. Minimizing y
l 1
l achieves the objective of minimizing the violation of the

inequalities. This objective does not minimize the number of inequalities violated but
minimizes the violation in terms of the extent or amount of deviation.

The complete formulation is

Minimize q1+q2+q3+q4+q5+q6+q7+q8
subject to
-2x -4y + 12z + p1 - q1 = 87
-8x -4y + 38z + p2 - q2 = 685
4x + 4y -12z + p3 q3 = -156
2x + 12y -6z + p4 - q4 = 104
-6x + 30x3+ z5- q5=598
2x -4y -14z + p6 - q6 = -442
-8x + 4y + 18z + p7 - q7 = 347
10x -8y + 32z + p8 - q8 = -789
x, y, z, pj, qj 0

The formulation has 19 variables and 8 constraints. It is like a goal programming problem
where the inequalities are converted to equations by adding both positive and negative
deviations. The achievement of the goal (in our case satisfying the inequalities) is enabled by
minimizing the sum of the negative deviations.

The optimum solution is given by x = 0, y = 18.56 and z = 19.79. The objective function
value is given by Z = xxx. This indicates that six out of the eight inequalities are violated and
the maximum violation is xxx. The solution does not give any importance for x while giving
x = 0.

If we have bounds on the values of x, y and z using the values of the known cares, we add six
constraints x 10, x 5, y 20, y 14, z 31 z 12. The optimum solution is x = 5, y =
18.20 and z = 20.93. The objective function value is given by Z = xxx. This indicates that six
out of the eight inequalities are violated and the maximum violation is xxx.

It is to be noted that car B is the closest to the ideal car and the person can now choose to buy
B. It is also to be noted that the coordinated of the ideal car need not be unique and can
represent coordinates within a range of values sometimes.
Case 1.1 - DATA ENVELOPMENT ANALYSIS

Data Envelopment Analysis (DEA) is a technique that can be used to compare the relative
efficiencies of units that perform similar tasks. The units that are compared for their relative
efficiencies are called Decision Making Units (DMUs). These DMUs perform the tasks
using resources that are inputs and convert them into useful outputs. The DMUs need not be
of same or similar size or scale but should be measured against the same set of inputs and
outputs.

The efficiency of the DMU (or any entity) is defined as the ratio of the output to input. We
have

Productivity can also be defined as output per unit input but efficiency traditionally is a
number that cannot exceed 1. When we have multiple inputs and multiple outputs, efficiency
is defined as the ratio between weighted output and weighted input and does not exceed 1.

Let there be n DMUs, each having m inputs and p outputs. Let Xij and Yik represent the
known values of the j th output and kth input for DMUi. Let uj and vk represent the weights
associated with the jth output and kth input for DMUi. The efficiency for DMUi is then given
by

( )

We can compute i if we know the weights uj and vk. Alternately we treat uj and vk as
variables and try to maximize i. If we let DMUi choose the values of uj and vk it is always
possible to choose these values such that i = 1. Since the efficiencies of all the DMUs have
to be 1, the chosen values of uj and vk should be such that i 1 for all i.

It is also possible to treat the weights uj and vk for DMUi as non negative variables and find
them such that i 1 for all i. This leads to the optimization problem where we

Such that

uj, vk 0.
The above formulation can be made simpler if we maximize the weighted output for DMUi
by forcing the weights such that the weighted input for DMUi equals 1. This adds a linear
constraint to the problem but more importantly converts the objective function to a linear
function. It also indirectly forces the weighted output to 1 because all the efficiencies are
1. The constraint that defines all efficiencies to 1 appears to be non linear but can easily
made linear by taking the denominator to the right hand side. The revised linear formulation
is as follows:

Maximize

Subject to

The above formulation is a Linear Programming problem and is called the CCR (Charnes,
Cooper and Rhodes, 1978) formulation.

Case Problem
Nine teams play a premier cricket tournament. Each team plays the other twice and there are
a few knockout matches to decide the eventual winner. We wish to evaluate the relative
efficiencies of the nine teams and through these measures identify the best team or try to rank
them. We consider three inputs and four outputs. The inputs are matches played, batsmen
played and bowlers played. The batsmen played is computed as the sum of the number of
players who batted in each inning. The bowlers played is computed as the sum of the number
of bowlers who bowled in each match. The outputs are matches won, number of 50s scored,
total runs scored and total wickets taken. A century is counted as two 50s. The data is given
in Table 1.30. Here, Nbat represents batsmen played and Nbowl represents bowlers played.

Table 1.30 Data for the case

Team Played Nbat Nbowl Won 50s W taken Runs
1 18 128 100 11 16 103 2645
2 17 126 101 12 11 107 2504
3 17 138 104 10 15 106 2462
4 18 132 111 10 10 107 2831
5 15 111 87 8 15 89 2472
6 16 133 90 8 8 79 2321
7 16 110 92 7 12 92 2516
8 15 115 92 4 13 83 2312
9 16 134 97 4 5 79 2321
We compute the relative efficiency for team 1 using the LP formulation. Let u1 to u3
represent the weights to the inputs and v1 to v4 be the weights for the output parameters. The
formulation is to

Maximize 11v1+16v2+103v3+2645v4
subject to
18u1 + 128u2 + 100u3 = 1
11v1 + 16v2 + 103v3 + 2645v4 - 18u1 - 128u2 - 100u3 0
12v1 + 11v2 + 107v3 + 2504v4 - 17u1 - 126u2 - 101u3 0
10v1 + 15v2 + 106v3 + 2462v4 - 17u1 - 138u2 - 104u3 0
10v1 + 10v2 + 107v3 + 2831v4 - 18u1 - 132u2 - 111u3 0
8v1 + 15v2 + 89v3 + 2472v4 - 15u1 - 111u2 - 87u3 0
8v1 + 8v2 + 79v3 + 2321v4 - 16u1 - 133u2 - 90u3 0
7v1 + 12v2 + 92v3 + 2516v4 - 16u1 - 110u2 - 92u3 0
4v1 + 13v2 + 83v3 + 2312v4 - 15u1 - 115u2 - 92u3 0
4v1 + 5v2 + 79v3 + 2321v4 - 16u1 - 134u2 -97u3 0
u1, u2, u3, v1, v2, v3, v4 0.

The optimum solution to the LP is given by v1 = 0.066901, v2 = 0.016505, u2 = 0.007813

with 1 = 1.

The efficiency for team 2 can be found by solving another LP where the objective function is
to Maximize 12v1+11v2+107v3+2504v4 and the first constraint is 17u1 + 126u2 + 101u3 = 1.
The remaining nine constraints are retained.

The efficiencies for teams 2 to 9 are found by solving the appropriate LP problems. They are
2 = 1 (v1 = 0.083333, u2 = 0.007937), 3 = 1 (v1 = 0.040736, v2 = 0.024472, v3 = 0.002128,
u1 = 0.058824), 4 = 0.98936 (v3 = 0.006028, v4 = 0.000122, u1 = 0.027290, u2 = 0.003854),
5 = 1 (v2 = 0.008206, v4 = 0.000355, u2 = 0.009009), 6 = 0.9229 (v1 = 0.031471, v4 =
0.000289, u3 = 0.011111), 7 = 1 (v4 = 0.000397, u2 = 0.009091), 8 = 0.935275 (v4 =
0.000405, u1 = 0.066667) and 9 = 0.8802 (v4 = 0.000379, u1 = 0.0625).

From the solution to the LP problems we observe that teams 1, 2, 3, 5 and 7 are able to reach
an efficiency of 1 while the others have maximum relative efficiencies less than 1. If we wish
to rank the nine teams with the information that we have, we can rank teams 1, 2, 3, 5 and 7
as having Rank 1, team 3 at position 6, team 6 at position 7, team 8 at position 8 and team 9
at position 9.

Let us consider team 4. This team is unable to reach an efficiency of 1 because another team
is preventing team 4 from reaching it. Clearly we can say that team 4 is not fully efficient. It
is obvious that at least one among the efficient teams (that have an efficiency of 1) has
prevented team 4 from getting an efficiency of 1. From the optimum solution for team 4 we
observe that 4 = 0.98936, v3 = 0.006028, v4 = 0.000122, u1 = 0.027290, u2 = 0.003854. Let
us compute the efficiencies for teams 1 to 3 and 5 to 9 using the values v 3 = 0.006028, v4 =
0.000122, u1 = 0.027290, u2 = 0.003854. These are 0.95, 1, 0.94, 1, 0.8, 1, 0.91 and 0.79
respectively. We observe that teams 2, 5 and 7 have been able to achieve efficiency of 1 for
the best weights for the inputs and outputs of team 4.

Table 1.31 Efficiencies of the teams

1 2 3 4 5 6 7 8 9
1 1 1 0.85 0.81 0.90 0.327 0.775 0.536 0.33
2 0.90 1 0.76 0.79 0.75 0.631 0.668 0.365 0.31
3 1 0.98 1 0.83 1 0.732 0.822 0.745 0.48
4 0.95 1 0.94 0.99 1 0.799 1 0.917 0.79
5 0.93 0.86 0.80 0.91 1 0.742 1 0.89 0.71
6 1 0.98 0.88 0.92 0.999 0.922 0.926 0.776 0.73
7 0.90 0.86 0.77 0.93 0.97 0.762 1 0.877 0.75
8 0.89 0.89 0.87 0.955 1 0.881 0.95 0.936 0.88
9 0.89 0.89 0.87 0.95 1 0.879 0.95 0.934 0.87

Table 1.31 shows the efficiencies for all the teams for the best weights for each team. The
diagonal elements show the maximum efficiency reached by the nine teams. The value aij
represents the efficiency achieved by team j for the best values of the weights of team i. For
team j, the row sum would tell us how the other teams are doing with respect to the best
values of the weights of team j and the column sum would indicate how well team j performs
with respect to the weights of other teams. The row sum values are 6.535, 6.194, 7.6, 8.4,
7.86, 8.15, 7.85, 8.27 and 8.26. We rank the teams based on the increasing values of the row
sum. The rank is 2, 1, 3, 7, 5, 6, 9, 8 and 4. The column sum values for the nine teams are
8.47, 8.48, 7.78, 8.1, 8.63, 6.68, 8.1, 6.98, 5.9 respectively. We can rank the teams based on
the decreasing values of the column sum. The rank is 2, 1, 5, 4, 7, 3, 8, 6, 9. We should also
take into account that ranking based on row sum and column sum is meaningful only when
the DMU (team) gets an efficiency of 1.

We rank teams 1, 2, 3, 5 and 7 (teams that achieved an efficiency of 1) based on the row sum.
The rank is 2, 1, 3, 7, 5. Based on column sum, the rank is 2, 1, 5, 7, 3. We could say that
team 2 gets the highest rank.

We consider the performance team 4 and team 9 for further analysis. Team 4 narrowly
missed an efficiency of 1, while team 9 performed poorest and could get an efficiency of
0.88. We write the LP formulation for team 4. This is as follows:

Maximize 10v1+10v2+107v3+2831v4
subject to
18u1 + 132u2 + 111u3 = 1
11v1 + 16v2 + 103v3 + 2645v4 - 18u1 - 128u2 - 100u3 0
12v1 + 11v2 + 107v3 + 2504v4 - 17u1 - 126u2 - 101u3 0
10v1 + 15v2 + 106v3 + 2462v4 - 17u1 - 138u2 - 104u3 0
10v1 + 10v2 + 107v3 + 2831v4 - 18u1 - 132u2 - 111u3 0
8v1 + 15v2 + 89v3 + 2472v4 - 15u1 - 111u2 - 87u3 0
8v1 + 8v2 + 79v3 + 2321v4 - 16u1 - 133u2 - 90u3 0
7v1 + 12v2 + 92v3 + 2516v4 - 16u1 - 110u2 - 92u3 0
4v1 + 13v2 + 83v3 + 2312v4 - 15u1 - 115u2 - 92u3 0
4v1 + 5v2 + 79v3 + 2321v4 - 16u1 - 134u2 -97u3 0
u1, u2, u3, v1, v2, v3, v4 0.

The dual to this LP is given by

Minimize q
Subject to
11z1 + 12z2 + 10z3 + 10z4 + 8z5 + 8z6 + 7z7 + 4z8 + 4z9 10
16z1 + 11z2 + 15z3 + 10z4 + 15z5 + 8z6 + 12z7 + 13z8 + 5z9 10
103z1 + 107z2 + 106z3 + 107z4 + 89z5 + 79z6 + 92z7 + 83z8 + 79z9 107
2645z1 + 2504z2 + 2462z3 + 2831z4 + 2472z5 + 2321z6 + 2516z7 + 2312z8 + 2321z9 2831
18q -18z1 - 17z2 - 17z3 - 18z4 - 15z5 - 16z6 - 16z7 - 15z8 - 16z9 0
132q -128z1 - 126z2 - 138z3 - 132z4 - 111z5 - 133z6 - 110z7 - 115z8 - 134z9 0
111q -100z1 - 101z2 - 104z3 - 111z4 - 87z5 - 90z6 - 92z7 - 92z8 - 97z9 0

The dual has 9 variables each representing a DMU since the primal has one constraint for
each DMU. There is a tenth variable q that corresponds to the first constraint and represents
the maximum efficiency of the primal. The dual has as many constraints as the number of
inputs and outputs. The optimum solution to the dual of team 4 is given by q = 0.98936 with
z2 = 0.28876, z5 = 0.7018and z7 = 0.148212. We also note that the z variables in the dual
solution correspond to the teams that had an efficiency of 1, for the best weights of team 4 (In
the primal).

To understand the dual problem better, we create a new DMU which has inputs and outputs
given by 0.28876 of team 2, 0.7018 of team 5 and 0.148212 of team 7. The first output of this
new DMU will be 0.28876 x 12 + 0.7018 x 8 + 0.148212 x 7 = 17.8. The inputs and outputs
computed are 17.8, 130.6, 103.86, 10.117, 15.48, 107 and 2831. We observe that the newly
created DMU has input values that of team 4 and has output values that of team 4.
Therefore a linear combination of teams 2, 5 and 7 is able to perform better than that of team
4, preventing team 4 from getting an efficiency of 1.
The dual of team 9 has a solution q = 0.8802 and z5 = 0.939. A new DMU which is 0.9389 of
team 5 would have inputs 14.1, 104,2 and 81.7 and will have outputs 7.5, 14.1, 83.6 and
2321.2 We observe that the newly created DMU has input values that of team 9 and has
output values that of team 9. Therefore team 5 performs better than that of team 9,
preventing team 0 from getting an efficiency of 1.

We revisit the dual problem of team 4. This is given by

The dual to this LP is given by
Minimize q
Subject to
11z1 + 12z2 + 10z3 + 10z4 + 8z5 + 8z6 + 7z7 + 4z8 + 4z9 10
16z1 + 11z2 + 15z3 + 10z4 + 15z5 + 8z6 + 12z7 + 13z8 + 5z9 10
103z1 + 107z2 + 106z3 + 107z4 + 89z5 + 79z6 + 92z7 + 83z8 + 79z9 107
2645z1 + 2504z2 + 2462z3 + 2831z4 + 2472z5 + 2321z6 + 2516z7 + 2312z8 + 2321z9 2831
18q -18z1 - 17z2 - 17z3 - 18z4 - 15z5 - 16z6 - 16z7 - 15z8 - 16z9 0
132q -128z1 - 126z2 - 138z3 - 132z4 - 111z5 - 133z6 - 110z7 - 115z8 - 134z9 0
111q -100z1 - 101z2 - 104z3 - 111z4 - 87z5 - 90z6 - 92z7 - 92z8 - 97z9 0

The optimum solution to the dual of team 4 is given by q = 0.98936 with z 2 = 0.28876, z5 =
0.7018and z7 = 0.148212. The sum of the z values is 1.1387. We add a constraint z 1 + z2 + z3
+ z4 + z5 + z6 + z7 + z8 + z9 = 1 to the dual.

The optimum solution to the dual is z4 = q = 1. This shows that the addition of the constraint
is able to increase the objective function of the dual to 1 but more importantly had made the
corresponding primal take the value of 1 and making it efficient. This efficiency called the
variable returns to scale (VRS) efficiency as against the efficiency without the additional
constraint called Constant returns to scale (CRS) efficiency. The VRS efficiency model is
called the Banker, Charnes and Cooper (BCC) model. It is obvious that VRS efficiency
CRS efficiency because in the VRS model we add a constraint to the dual and it can only
increase the objective function value of a minimization problem.

The primal problem corresponding to the VRS dual is given by

Maximize 10v1+10v2+107v3+2831v4 + Z
subject to
18u1 + 132u2 + 111u3 = 1
Z + 11v1 + 16v2 + 103v3 + 2645v4 - 18u1 - 128u2 - 100u3 0
Z + 12v1 + 11v2 + 107v3 + 2504v4 - 17u1 - 126u2 - 101u3 0
Z + 10v1 + 15v2 + 106v3 + 2462v4 - 17u1 - 138u2 - 104u3 0
Z + 10v1 + 10v2 + 107v3 + 2831v4 - 18u1 - 132u2 - 111u3 0
Z + 8v1 + 15v2 + 89v3 + 2472v4 - 15u1 - 111u2 - 87u3 0
Z + 8v1 + 8v2 + 79v3 + 2321v4 - 16u1 - 133u2 - 90u3 0
Z + 7v1 + 12v2 + 92v3 + 2516v4 - 16u1 - 110u2 - 92u3 0
Z + 4v1 + 13v2 + 83v3 + 2312v4 - 15u1 - 115u2 - 92u3 0
Z + 4v1 + 5v2 + 79v3 + 2321v4 - 16u1 - 134u2 -97u3 0
u1, u2, u3, v1, v2, v3, v4 0; Z unrestricted.

Since Z is unrestricted in sign, we can replace it by Z1 Z2 (where Z1 and Z2 0) and solve

the problem optimally to get the solution v1 = 0.025598, v4 = 0.000301, u2 = 0.007576 and Z2
= 0.106817. Since Z = Z1 Z2, we have Z = -0.106817.

We defined the VRS model by the addition of the constraint to the dual of the
VRS model. When we write the dual to the BCC (also VRS) model, we add a variable to the
dual of the VRS model which is unrestricted in sign and is added to the constraints involving
the DMUs. This is equivalent of defining the output as a constant + a linear expression for the
weighted output. We now observe for team 4 that the constant takes a negative value and is
able to increase the efficiency of team 4 to 1.

The VRS formulation for team 8 is able to increase its efficiency to 0.9375 with z5 = 1
indicating that team 5 dominates team 9.

We have already observed that teams 1, 2, 3, 5 and 7 are able to reach efficiency of 1. We
ranked these teams earlier based on relative efficiencies. We defined the performance through
their efficiencies which restricted their weighted output to be lesser than (not greater) than
their weighted input. If we relax the condition that efficiency can be greater than 1, we may
be able to rank the teams based on the highest (maximum) efficiency that they can reach for
their self defined weights. Since efficiency cannot exceed 1, we define a super efficiency that
can take values more than 1.

We compute the super efficiency for team 1 using the following LP model:

Maximize 11v1+16v2+103v3+2645v4
subject to
18u1 + 128u2 + 100u3 = 1
12v1 + 11v2 + 107v3 + 2504v4 - 17u1 - 126u2 - 101u3 0
10v1 + 15v2 + 106v3 + 2462v4 - 17u1 - 138u2 - 104u3 0
10v1 + 10v2 + 107v3 + 2831v4 - 18u1 - 132u2 - 111u3 0
8v1 + 15v2 + 89v3 + 2472v4 - 15u1 - 111u2 - 87u3 0
8v1 + 8v2 + 79v3 + 2321v4 - 16u1 - 133u2 - 90u3 0
7v1 + 12v2 + 92v3 + 2516v4 - 16u1 - 110u2 - 92u3 0
4v1 + 13v2 + 83v3 + 2312v4 - 15u1 - 115u2 - 92u3 0
4v1 + 5v2 + 79v3 + 2321v4 - 16u1 - 134u2 -97u3 0
u1, u2, u3, v1, v2, v3, v4 0.

In the above formulation we have left out the constraint that restricts the efficiency of team 1
to be 1. Now the (super) efficiency can exceed 1.

The optimum solution to the super efficiency problem of team 1 is given by v1 = 0.060652, v2
= 0.025652, u3 = 0.01 with 1 = 1.077. The super efficiencies for teams 2, 3, 5 and 7 are
1.155, 1.026, 1.125 and 1.0394 respectively. The team ranks based on the efficiency (and
super efficiency) is 2, 1, 3, 5, 7, 4, 8, 6 and 9. When a team is unable to get an efficiency of 1
or when the efficiency is < 1, the super efficiency equals the efficiency.