Optimal Scale Sizes and Average-Revenue Efficiency under Managerial Disposability

Finding optimal scale sizes of entities is a significant aspect for managers due to the changes of performance measures. Furthermore, undesirable measures are presented in many investigations. In the existing data envelopment analysis (DEA) approaches, optimal scale sizes (OSSs), average-cost efficiency (ACE) and average-revenue efficiency (ARE) of decision making units (DMUs) with desirable measures under strong disposability have been estimated while there are undesirable measures in many real world applications. Therefore, in this paper, OSSs and ARE of DMUs with undesirable outputs are addressed under managerial disposability. ARE is defined as the composite of scale and output allocative efficiencies under managerial disposability. To illustrate in detail, a two-stage DEA-based approach is rendered to assess ARE and OSSs in the presence of undesirable outputs. A numerical example is provided to clarify the introduced approach in this study.

Keywords:

Data Envelopment Analysis , Average-Revenue Efficiency , Optimal Scale Size , Undesirable Outputs , Managerial Disposability.