Answer Sheet

1st Semester, 2021-2022Academic Year

System Evaluation Method

Final Assignment
Student ID: F1020090210 Name: Proshenjit Biswas
Part I. (Full Score: 25Points)

(1) Plot DMUs in the figure.

(2) Draw the VRS DEA best frontier on the figure and point out which DMU is inefficient
under VRS assumption.

(3) Draw the CRS DEA best frontier on the figure and point out which DMU is efficient
under CRS assumption.

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Part II. (Full Score: 40Points)

(a) Formulate the input-oriented VRS envelopment model for Company A.

a-Input-oriented VRS envelopment model for Company A.

100λA+55λB+99λC+66λD≤100 θ

67λA+98λB+44λC+52λD≤67θ

122λA+52λB+75λC+77λD≥122

231λA+35λB+66λC+80λD≥231

λA+λB+λC+λD =1

λA, λB, λC, λD ≥0

(b) Formulate the output-oriented VRS envelopment model for Company B.

b-Formulate the output-oriented VRS envelopment model for Company B.

For DMU B: max φ

s.t.

100λA+55λB+99λC+66λD≤55

67λA+98λB+44λC+52λD≤98

122λA+52λB+75λC+77λD≥52φ

231λA+35λB+66λC+80λD ≥35φ

λA+λB+λC+λD =1

λA, λB,λC,λD, ≥0

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(c) Formulate the input-oriented CRS multiplier model for Company C.

c-Formulate the input-oriented CRS multiplier model for Company C

Input-oriented CRS multiplier model for Company C:

For DMU C:

max 75u1+ 66u2

s.t. 122u1+ 231u2-100v1-67v2≤0

52u1+ 35u2-55v1-98v2≤0

75u1+ 66u2-99v1-44v2≤0

77u1+ 80u2-66v1-52v2≤0

99v1+44v2＝1

u1，u2，v1，v2≥0

(d) Formulate the output-oriented CRS multiplier model for Company D.

d-Formulate the output-oriented CRS multiplier model for Company D.

Output-oriented CRS multiplier model for Company D:
For DMU D:
min 66v1+52v2
s.t. 100v1+67v2-122u1- 231u2 ≥0

55v1+98v2 -52u1- 35u2 ≥ 0

99v1+44v2-75u1-66u2 ≥ 0

66v1+52v2 -77u1- 80u2 ≥ 0

77u1+80u2 ＝1

u1，u2，v1，v2≥0

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Part III. (Full Score: 35 Points)
(1) Talk about your understandings about DEA in your own words.
 Data envelopment analysis (DEA) is a nonparametric technique in activities exploration
and financial matters for the assessment of creation boondocks. It is utilized to observa-
tionally quantify useful proficiency of dynamic units (DMUs). DEA provides a fair
benchmarking tool that includes a technical efficiency score for each DMU, a technical
efficiency reference set with peer DMUs, a target for a technically inefficient DMU,
and information detailing by how much inputs can be decreased or outputs can be in-
creased to improve performance of DMUs. In this paper, we compare DEA models to
benchmark technically inefficient DMUs, and prove that popular models like the
Slack-Based Measure (SBM) and Charnes, Cooper and Rhodes (CCR) may not give the
acceptable results for benchmarking technically inefficient DMUs as strong as the
weighted additive (ADD) model. The study also warns against applying the conven-
tional DEA models for most of applications and suggests using the Kourosh and Arash
Method to (KAM) assess the performance evaluation of DMUs.

(2) Explain the RTS in your own words.

 The returns to scale (RTS) for a firm are defined as the increase or the decrease in the
total output when the firm increases its inputs of production by a given factor. Returns
to scale is a term that refers to the proportionality of changes in output after the
amounts of all inputs in production have been changed by the same factor. Technology
exhibits increasing, decreasing, or constant returns to scale. There are three types of re-
turns to scale:
 Increasing returns to scale - It arises when the total output increases by more
than the increase in all the inputs
 Constant returns to scale - Occurs when the total output increases by the same
factor of the increase in all the inputs
 Decreasing returns to scale - Arises when the total output increases by a factor
that is less than the increase in all the inputs.

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