Abstract
The discussion about the bias due to input (or output) aggregation in efficiency measurement based on data envelopment analysis, recently revisited by Tauer (Citation2001) and Färe and Zelenyuk (Citation2002) is continued. Attention is focused on the direction and the bounds of the aggregation bias.
Notes
Also, they reformulated the traditional Farrell-type technical efficiency measure into a subvector estimator.
Input orientation was chosen for the purpose of illustration and similar analysis can be done for the output orientation as well. Also note that the framework of variable returns to scale technology is chosen, modelled by including the restriction
To be precise, it is not appropriate to call the measure in EquationEquation 3 ‘technical’ efficiency, since it is not independent of prices. A better name might be subcost efficiency.