Constrained games for evaluating organizational performance

This paper develops a class of two-person game theoretic models that provide insight into exceptional aspects of organizational performance. In contrast to earlier games used for performance evaluations, the new model permits constraints on the strategies available to each of the players, a restriction that is frequently imposed in practice. Despite the more complicated nonlinearities involved in these games compared to classical (finite) two-person forms, the players' solutions (Nash equilibria) can still be described as the optimal solutions to a primal-dual linear programming (LP) pair. If the game's data elements are replaced with the observed inputs and outputs obtained from competing organizations, then the resulting LPs resemble those currently used in the core ratio models of Data Envelopment Analysis (DEA). Apart from furthering the intertwinement of game theory and DEA, the constrained games feature additional improvements such as the ability to handle zeros in the data, a well-defined sensitivity analysis, and the unification of previous DEA principles within the context of constrained strategies.