Measurement of Returns to Scale in DEA Using the CCR Model

Abstract

In data envelopment analysis (DEA) literature, the returns to scale (RTS) of an inefficient decision making unit (DMU) is determined at its projected point on the efficient frontier. Under the occurrences of multiple projection points, however, this evaluation procedure is not precise and may lead to erroneous inferences as to the RTS possibilities of DMUs. To circumvent this, the current communication first defines the RTS of an inefficient DMU at its projected point that lies in the relative interior of the minimum face. Based on this definition, it proposes an algorithm by extending the latest developed method of measuring RTS via the CCR model. The main advantage of our proposed algorithm lies in its computational efficiency.

Keywords: Data envelopment analysis, Returns to scale, Most productive scale size, CCR model, Minimum face, Projection point