Category: 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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Units invariance

The efficiency scores of the DEA ratio models are independent of the units in which the factors are measured. The input and output values can thus be scaled through multiplication by a constant as proven in Chames and Cooper (1985). [Charnes A, Cooper W W (1985) ‘Preface to topics in data envelopment analysis’, in Thompson …

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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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Visualisation

The process of developing a set of visual techniques such as graphs and charts through which the DEA results can be better understood.

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

Scale of operations

The so-called ‘size’ of the DMU, it may be associated with either the inputs or the outputs, depending on the situation.

Unit isoquant/Isoquant

Yet another name for the efficiency frontier, this term emphasises the fact that each segment of the frontier represents the trade-off possibilities that can be made between the inputs or outputs of a given DMU on the isoquant segment while keeping the DMU efficient.

Pareto-efficiency/Pareto-Koopmans efficiency:

Simply stated, a unit is Pareto-efficient when an attempt to improve on any of its inputs or outputs will adversely affect some other inputs or outputs. Formally, Chames et al (1981) consider a DMU to be 100% efficient only when ‘none of its inputs can be decreased without either (i) decreasing some of its outputs, …

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Productivity

For a single input-output case, the ratio of a unit’s output to its input. Productivity varies according to changes that occur in the production technology, the efficiency of the production process (which can be measured through DEA) and the production environment (Lovell 1993). [Lovel C A K (1993), ‘Productive frontiers and productive efficiency’, in: Fried …

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Virtual multipliers

Another name for weights