30 June 2015 7 2K Report

1. In the basic CCR model of DEA, we want to maximize the sum of weighted outputs. Then why don’t we want to minimize the sum of weighted inputs in its dual form?

2. What does the variable θ mean which is very often used in the dual form (i.e what is the name of the variable)? Is it optimal efficiency score that we are interested to find out? If it is, then why do we want to minimize efficiency in the dual form? Does it make sense to minimize efficiency?

3. Can anybody please tell me the physical interpretations of the first two constraints that are used in the dual form (i.e. Σxij*λj= yro)?

4. What is the physical significance/interpretation of the decision variable(s) (λ1, λ2,...) used in the constraints of dual form? In other words, what actually λ1 or λ2 these parameters represent and what do their values represent for a particular decision making unit, when they are addressed in the efficiency reference set or benchmarks?

5. The concept of slack in DEA is not very clear to me (though I have gone through several papers and text books). In an input-oriented model, even if a DMU has 100% efficiency, it may be inefficient compared to some other efficient unit(s) as the DMU should use less input resources. Isn’t it very surprising that a DMU is unable to use its minimum resource(s) (or in other words, it is absorbing more resources or excess inputs and it has a slack), but still it is achieving 100% efficiency!!! How this becomes possible? Again, regarding the inefficient DMUs, they should use less resource, then why the slack for these units are zero?

6. Why scale efficiency or size of a DMU (i.e. too small or too large) sometimes may be the cause of inefficiency (that the CRS model comprehends or takes into account)?

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