Weight Restrictions in DEA:Misplaced Emphasis?
AbstractMeasuring productive efficiency is an important research strand within fields of economics, management science and operations research. One definition of efficiency is the proportional scaling needed for observations of an inefficient unit to be projected onto an efficient production function and another definition is a ratio index of weighted outputs on weighted inputs. When linear programming is used to estimate efficiency the two definitions give identical results due to the fundamental duality of linear programming. Empirical applications of DEA using linear programming showed a prevalence of zero weights leading to questioning the consequence for the efficiency score estimate based on the ratio definition. Early literature on weight restrictions is exclusively based on the ratio efficiency. It was stated that variables with zero weights had no influence on the efficiency score, in spite of the alleged importance of the variables. This has been one motivation for introducing restrictions on weights. Another empirical result was that often there were too many efficient units. This problem could also be overcome by introducing weight restrictions. Weight restrictions were said to introduce values for inputs and outputs. The paper makes a critical examinations of these claims based on defining efficiency relative to a frontier production function.
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Bibliographic InfoPaper provided by Oslo University, Department of Economics in its series Memorandum with number 05/2011.
Length: 28 pages
Date of creation: 17 Feb 2011
Date of revision:
Publication status: Forthcoming as R. Førsund, Finn, 'Weight Restrictions in DEA:Misplaced Emphasis?' in journal of productivity analysis, prepublication online, 2012.
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Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
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Weight restrictions; DEA; efficiency; frontier production function; primal and dual linear programming problems;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D20 - Microeconomics - - Production and Organizations - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-19 (All new papers)
- NEP-CSE-2011-03-19 (Economics of Strategic Management)
- NEP-ECM-2011-03-19 (Econometrics)
- NEP-EFF-2011-03-19 (Efficiency & Productivity)
- NEP-MIC-2011-03-19 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Charnes, A. & Cooper, W. W. & Huang, Z. M. & Sun, D. B., 1990. "Polyhedral Cone-Ratio DEA Models with an illustrative application to large commercial banks," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 73-91.
- Forsund,F.R. & Sarafoglou,N., 2000. "On the origins of data envelopment analysis," Memorandum 24/2000, Oslo University, Department of Economics.
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