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, or (ii) increasing some of its other inputs, and none of its outputs can be increased without either (i) increasing one or more of its inputs or (ii) decreasing some of its other outputs’. Since the condition for Pareto-efficiency is that a DMU’s efficiency score is 1, efficiency and Pareto-efficiency are synonymous. [Chames A, Cooper W W and Rhodes E (1981), ‘Evaluating program and managerial efficiency: an application of data envelopment analysis to program follow through’, Mgmt. Sci., 6, pp 668-697.]
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FAQ
- What is Data Envelopment Analysis?
- BCC
- Categorical variable
- CCR (ratio) mode
- Composite unit
- Constant returns to scale
- Convex cone - Conical hull
- Convex hull
- Convexity constraint
- Cross efficiency matrix
- DEA algorithm
- DEA results are biased
- Decreasing returns to scale
- Discretionary factor
- Discriminatory power
- DMU (Decision making unit)
- Dual Model
- Dual weights - dual multipliers
- Efficiency score
- Efficiency/Productive efficiency
- Envelopment form
- Environmental factor
- Epsilon
- Exogeneously fixed factor
- Facet
- Homogeneity
- Increasing returns to scale
- Input
- Input-oriented
- Input/output mix
- Isotonicity
- Most productive scale size (MPSS)
- Multiplier form
- Non-naturally enveloped unit
- Nondiscretionary factor
- Ordinal variable
- Outlier
- Output
- Output-oriented
- Overall efficiency
- Pareto-efficiency/Pareto-Koopmans efficiency:
- Peer group
- Piecewise linearity
- Primal (CCR) model
- Production function
- Productivity
- Projected point
- Radial measure
- Ratio models
- Reference set
- Reference unit
- Scale efficiency
- Scale of operations
- Slacks
- Targets
- Technical efficiency
- Technology/Production technology
- Unit
- Unit isoquant/Isoquant
- Units invariance
- Variable
- Variable returns to scale
- Virtual input(output)
- Virtual multipliers
- Visualisation
- Weight Flexibility
- Weights
- Well-rounded performance
- Window analysis