Category: Frequently Asked Question

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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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.

Slacks

The additional improvement (increase in outputs and/or decrease in inputs) needed for a unit to become efficient.

Technical efficiency

An efficiency measure that ignores the impact of scale-size by comparing a DMU only to other units of similar scale. Technical efficiency is computed using the BCC model. Overall efficiency is sometimes referred to as technical efficiency as closely follows the concept of technical efficiency developed by Farrell (1957), which technical efficiency as defined here, …

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Projected point

Refers to an inefficient DMU’s composite unit to emphasise that geometrically it involves the projection of the inefficient DMU onto the efficiency frontier (Ali and Seiford 1993). [Ali A and Seiford L (1993), ‘The mathematical programming approach to efficiency analysis’, in: Fried H, Knox C A K and Schmidt S (editors), The measurement of productive …

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Ratio models

The CCR and BCC models both define efficiency as a ratio of weighted outputs over weighted inputs, hence they are often known as ratio models.

Overall efficiency

Same as aggregate efficiency

Peer group

Another name for reference set

Multiplier form

Associated with each DEA model type (eg CCR, BCC) is both a primal and dual formulation. To avoid confusion over which formulation is primal and which dual, the multiplier form is always understood to refer to the formulation involving virtual multipliers (Ali and Seiford 1993). [Ali A and Seiford L (1993), ‘The mathematical programming approach …

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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.