Efficiency Measurement Using Data Envelopment Analysis (DEA)

Abstract

This chapter is a pivotal chapter in this book. We now begin to explicitly consider the issue of inefficiency. In the previous four chapters we have discussed least squares econometric methods and index number methods, which implicitly assume that all firms are fully efficient. In the remaining chapters, we relax this assumption and describe methods which may be used to estimate frontier functions and measure the efficiencies of firms relative to these estimated frontiers.