A DMU is said to operate at increasing returns to scale (IRS) if a proportionate increase in all of its inputs results in a greater than proportionate increase in its outputs. If for a given unit the sum of its dual weights in the dual model turns out to be less than 1, then that …
Category: Frequently Asked Question
Environmental factor
While in the strictest sense all factors depend on their environment, an input or output factor that purposefully attempts to make up for the inherent differences in the DMIJs being analysed is generally referred to as an environmental factor. The larger the field, the more probable that some units have intrinsic advantages over others. Environmental …
Homogeneity
Refers to the degree of similarity between the units in the field. Only units that bear some similarities in their operational goals should be included in the same field, otherwise the results may be biased.
Input/output mix
The proportions in which a unit’s input/output values are combined.
Facet
In higher dimensions, the segments forming the efficiency frontier are known as facets.
Efficiency score
Efficiency is measured on a scale of 0 to 1, where a value of I indicates the unit is relatively efficient, and a value less than 1 indicates the unit is inefficient. The efficiency score of a unit will vary according to the factors and DMUs included in the analysis. In the early days of …
Input
Any factor used as a resource by the DMU for producing something of value.
Efficiency/Productive efficiency
A measure of a unit’s ability to produce outputs from its set of inputs. Since the efficiency of a given DMU is measured with respect to other DMUs in the field, the obtained efficiency is always relative. From the standpoint of the efficiency frontier, an enveloped unit’s efficiency is related to its radial distance from …
Exogeneously fixed factor
An input or output that is beyond the control of the DMU manager. A fast-food restaurant may have an input such as years of operations, that it cannot control and hence the unit cannot improve its efficiency by reducing that input.
Input-oriented
A term used in conjunction with the ratio models to indicate that an inefficient unit is made efficient through the proportional reduction of its inputs while its outputs proportions are held constant. While the CCR model yields the same efficiencies regardless of whether it is input or output-oriented, this is not so with the BCC …