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

Pierre Ouellette, Jean-Patrice Quesnel and Stéphane Vigeant ()

European Journal of Operational Research, 2012, vol. 220, issue 2, 571-576

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.

Keywords: Data envelopment analysis; Regulation; Returns to scale; Quasi-fixed inputs (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (3)

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DOI: 10.1016/j.ejor.2012.01.048

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Handle: RePEc:eee:ejores:v:220:y:2012:i:2:p:571-576