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. …
Category: Frequently Asked Question
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, …
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 …
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 …
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.