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Discretionary factor

A unit is said to operate at decreasing returns to scale (DRS) if a proportionate increase in all of its inputs results in a less than proportionate increase in its outputs. If for a given DMU, the sum of the dual weights in the dual model (M2) is greater than 1, then that unit can be said to operate at DRS, assuming it is technically efficient. See Banker and Morey (1986) or Banker and Thrall (1992) for an in-depth analysis.
See also: increasing returns to scale.
– Banker R D and Morey R (1986) ‘The use of categorical variables in data envelopment analysis’, Mgmt. Sci., 32, pp 1613-1627.
– Banker R D and Thrahl R M (1992) ‘Estimation of returns to scale using data envelopment analysis’, Eur. J. of OpI. Res., 62, pp 74-84.

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