1. The Public Sector Many Criteria, MCDM Game Theory, Group Decisions Profit not the main objective Different measures than in the private sector Efficiency Analysis, DEA (Data Envelopment Analysis)

2. DEA Applications Hospitals, Health Care Service Bank Branches Elementary Schools University Faculties Police Precincts

3. Data Envelopment Analysis Efficiency Analysis for similar units Efficiency = Value of Output / Cost of Input <= 1 What prices to use? Each unit allowed to use most favorable pricing

4. DEA uses LP Units k, inputs i, outputs j Prices: X i for inputs and Y j for outputs B ki = quantity of input i used by k A kj = output j produced by k  j A kj Y j   i B ki X i all k One LP solved for each unit k:  i B ki X i = 1 (scaling) max z =  j A kj Y j

5. DEA interpreted z = 1 => Efficient unit z Inefficient Inefficient unit k < Weighted combination of the efficient units Shadow Prices for k => weights See HOSPITALDEA.XLS in W&A

6. Other Examples of Public Decision Making Models Page 184- in W&A, DEA Problems 94 and 95 p. 200 in W&A, waste disposal and IRS Problem 78 page 278 in W&A, ambulance service Problem 41 p. 497 in W&A, tax policy See also Rardin p. 60, 132, 566, 580