Farrell Revisited: Visualising the DEA Production Frontier
Link to article:
Authors:
Førsund, Finn R., Sverre A. C. Kittelsen, Vladimir E. Krivonozhko
Year:
2007
Reference:
Memorandum
Number in series: 15
Summary
The contributions of the paper are threefold: i) compare with mathematical rigour the Charnes, Cooper, and Rhodes DEA model and the Farrell model exhibiting constant returns to scale, ii) reinterpret the contribution of Farrell and Fieldhouse that extended the analysis to variables returns to scale and establish the connection with the approach in Banker, Charnes and Cooper, iii) provide graphical visualisation of properties of the frontier function. Both papers by Farrell emphasised the importance of graphical visualisation of non-parametric frontier functions, but, to our knowledge, this is seldom followed up in the literature. We use a graphical package (EffiVision) with a numerical representation of the frontier functions, representing the contemporary development of visualisation. By making suitable cuts through the DEA frontier in multidimensional space, various graphical representations of features of economic interest can be done. Development of ray average cost function and scale elasticity are novel illustrations.
JEL:
C61, D24
Keywords:
Farrell efficiency measure, DEA, variable returns to scale, visualisation, grouping method
Project:
Oppdragsgiver: Norges forskningsrådOppdragsgivers prosjektnr.:
Frisch prosjekt: 2102 - Quality and efficiency analysis in the public sector
Contact:
finn.førsund@econ.uio.no
Financing:
Frisch Centre
