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Farrell Revisited: Visualising the DEA Production Frontier
By Førsund, Finn R., Sverre A. C. Kittelsen, Vladimir E. Krivonozhko
Memorandum 15/2007
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Abstract |
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 Classification:
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C61, D24 |
| Keywords:
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Farrell efficiency measure, DEA, variable returns to scale, visualisation, grouping method |
| Project:
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2102 Quality and efficiency analysis in the public sector
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| Financing:
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Frisch Centre |
| Contact:
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finn.førsund@econ.uio.no |
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[Full Text PDF]
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