DEA Cross Efficiency Evaluation Method Based on the Solution Strategy of Double Reference Points with Prospect Theory

Purpose/Significance In the practice of decision making, the decision-maker’s subjective preferences and psychological expectations will affect the efficiency evaluation results.However, this factor was not taken into account in the traditional cross-efficiency evaluation method.In response to the problem, considering the diversity of reference points in complex real-world problems, this paper constructs an efficiency evaluation strategy model with double reference points based on prospect theory. Design/Methodology The paper first defines reference points from both external and internal aspects, and sets double reference points to reflect the external competitive advantages and internal characteristics of decision makers.Then, the value of each reference point is calculated by using the value function of prospect theory. Further, the positive ideal point coefficient is introduced to integrate the prospect value and construct cross efficiency model based on double reference points with prospect theory, then solve the improved cross efficiency matrix. Findings/Conclusions This evaluation strategy method obtains more reasonable evaluation results according to the different preferences of decision makers.