Some Models for Estimating Technical and scale Inefficiencies in Data Envelopment Analysis

Article Abstract:

In management contexts, mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best. In this capacity, mathematical programming serves as a planning aid to management. Data Envelopment Analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments, however they may have been planned or executed. Mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities. The CCR ratio form introduced by Charnes, Cooper and Rhodes, as part of their Data Envelopment Analysis approach, comprehends both technical and scale inefficiencies via the optimal value of the ratio form, as obtained directly from the data without requiring a priori specification of weights and-or explicit delineation of assumed functional forms of relations between inputs and outputs. A separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of DEA directly on observational data. Technical inefficiencies are identified with failures to achieve best possible output levels and-or usage of excessive amounts of inputs. Methods for identifying and correcting the magnitudes of these inefficiencies, as supplied in prior work, are illustrated. In the present paper, a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing, constant or decreasing returns to scale (in multiple output situations). The results are discussed and related not only to classical (single output) economics but also to more modern versions of economics which are identified with 'contestable market theories.'

Economics, Business planning, Efficiency, Analysis, Performance Measurement, Programming, Methods, Linear Programming Estimation

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Some models for estimating technical and scale inefficiencies in data envelopment analysis

Article Abstract:

Mathematical programming is typically used by management to examine a series of feasible alternative courses of action until the best plan is found. In this capacity, mathematical programming acts as a planning tool for management. This role is reversed by Data Envelopment Analysis, and mathematical programming is utilized to obtain ex post facto examinations of the relative effectiveness of management performance, although they may have to be executed or planned.

Planning, Linear programming, Usage, Industrial efficiency, Economic efficiency, Industrial productivity, Input-output analysis

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Response to 'Decision Problems under Risk and Change Constrained Programming; Dilemmas in the Transition'

Article Abstract:

This response to a previous article in Management Science finds fault with a proof of mathematical equivalence in the article. The consequences to the development in the article are discussed. The authors mention their report, 'Chance Constrained Programming Methods in Probabilistic Programming', which has additional details about this.

Management science, Decision theory, Stochastic Model, Probability

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