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Measuring returns to scale in DEA models when the firm is regulated

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  • Ouellette, Pierre
  • Quesnel, Jean-Patrice
  • Vigeant, Stéphane

Abstract

In the standard framework of data envelopment analysis (DEA) models, the returns to scale are fully characterized using the multiplier on the convexity constraint of inefficient decision making units (DMU) using the projection of the input–output vector on the frontier. In this note, we investigate how the returns to scale measurements in DEA models are affected by the presence of regulatory constraints. These additional constraints change the role played by the convexity constraint. In order to avoid biased estimation of the returns to scale, we show that the interaction between the regulatory and the convexity constraints has to be taken into account.

Suggested Citation

  • Ouellette, Pierre & Quesnel, Jean-Patrice & Vigeant, Stéphane, 2012. "Measuring returns to scale in DEA models when the firm is regulated," European Journal of Operational Research, Elsevier, vol. 220(2), pages 571-576.
    • Handle: RePEc:eee:ejores:v:220:y:2012:i:2:p:571-576
    DOI: 10.1016/j.ejor.2012.01.048
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    References listed on IDEAS

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    Cited by:

    1. Hajar Haghighatpisheh & Sohrab Kordrostami & Alireza Amirteimoori & Farhad Hosseinzadeh Lotfi, 2022. "Optimal scale sizes in input–output allocative data envelopment analysis models," Annals of Operations Research, Springer, vol. 315(2), pages 1455-1476, August.
    2. Venkatesh, Anand & Kushwaha, Shivam, 2018. "Short and long-run cost efficiency in Indian public bus companies using Data Envelopment Analysis," Socio-Economic Planning Sciences, Elsevier, vol. 61(C), pages 29-36.
    3. Vigeant, Stéphane, 2016. "From partial derivatives of DEA frontiers to marginal products, marginal rates of substitution, and returns to scaleAuthor-Name: Ouellette, Pierre," European Journal of Operational Research, Elsevier, vol. 253(3), pages 880-887.

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