Category Archive: Frequently Asked Question

BCC

Introduced by Banker, Chames and Cooper (1984), this model measures technical efficiency as the convexity constraint ensures that the composite unit is of similar scale size as the unit being measured. The resulting efficiency is always at least equal to the one given by the CCR model, and those DMUs with the lowest input or …

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Window analysis

Tabular method for examining the changes in the efficiencies of a set of units over time. A set of time periods (1 ..t) is chosen and the efficiency of each unit (1..n) is computed separately for each period so that the efficiency of a given unit over each period is treated as a new unit …

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Targets

The input and output values that would render an inefficient unit relatively efficient. Thanassoulis and Dyson (1992) examine ways of modifying the DEA model so as to set priorities over which targets should be improved. [Thanassoulis E and Dyson R G (1992) ‘Estimating preferred target input-output levels using data envelopment analysis’, J. of Opi. Res., …

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Well-rounded performance

If a DMU is rated efficient and more or less equal importance has been given to each of its factors, it is said to exhibit well-rounded performance.

Reference set

The set of efficient units from which an inefficient unit’s inefficiency has been determined. Originally, the term was used to denote the set of all units in the analysis (i.e. the field) and the set of efficient units was known as a reference subset, a term still used by some.

Virtual input(output)

Virtual input is obtained for each input by taking the product of the input’s value and its corresponding optimal weight as given by the solution to the primal model. Virtual outputs are obtained analogously. A virtual input or output describes the importance attached to the given factor. The virtual inputs always add up to the …

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Most productive scale size (MPSS)

MPSS is a unit (point) on the efficiency frontier that maximises the average productivity for its given input-output mix and after which decreasing returns to scale set in. See Banker & Kemerer (1989) on how to compute the MPSS. [Banker R and Kemerer C (1989) ‘Scale economies in new software development’, IEEE Trans. On Softw. …

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Radial measure

Both ratio models rely on a radial or proportional measure as a DMU’s efficiency score depends on its proportional distance to the efficiency frontier

Variable returns to scale

If it is suspected that an increase in inputs does not result in a proportional change in the outputs, a model which allows variable returns to scale (VRS) such as the BCC model should be considered.

Technology/Production technology

The operational practices (a combination of the management and engineering knowledge) that determine how a DMU’s inputs are transformed into outputs.

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