Weight Restrictions in DEA:Misplaced Emphasis?

Finn Førsund

No 05/2011, Memorandum from Oslo University, Department of Economics

Abstract: Measuring 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.

Keywords: Weight restrictions; DEA; efficiency; frontier production function; primal and dual linear programming problems (search for similar items in EconPapers)
JEL-codes: C61 D20 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2011-02-17
New Economics Papers: this item is included in nep-cse, nep-ecm, nep-eff and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published as R. Førsund, Finn, 'Weight Restrictions in DEA:Misplaced Emphasis?' in journal of productivity analysis, 2013, pages 271-283.

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Journal Article: Weight restrictions in DEA: misplaced emphasis? (2013)
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