Protocols for MPS choices in VEA models with variable returns to scale

In this paper, we explore the implications of using different strongly efficient Decision Making Units (DMUs) as the Most Preferred Solution (MPS) in Value Efficiency Analysis (VEA) models assuming variable returns to scale. In particular, we show that either a DMU that belongs to the set of strongly CCR-efficient DMUs or a combination of jointly strongly CCR-efficient DMUs constitute the only consistent MPS choices for both constant-returns-to-scale and variable-returns-to-scale VEA models, where a MPS choice is consistent if and only if the resulting VEA technology does not allow for free and/or unlimited production. In addition, we show that the scale properties of the efficient VEA frontier are affected by the choice of the MPS and in essence depend on the range of the interval between the MPS’s right- and left-side scale elasticities.

RAVANOS Panagiotis;  KARAGIANNIS Giannis; 

2025-08-13

SPRINGER

JRC136754

0254-5330 (online),   

https://publications.jrc.ec.europa.eu/repository/handle/JRC136754,   

10.1007/s10479-024-06286-w (online),