The measurement of returns to scale under a simultaneous occurrence of multiple solutions in a reference set and a supporting hyperplane

This research theoretically explores the measurement of RTS (Returns to Scale) under a possible occurrence of multiple solutions in DEA (Data Envelopment Analysis). In this study, the occurrence of multiple solutions is classified into Type I and Type II. Type I is an occurrence of multiple solutions in a reference set. Type 11 is an occurrence of multiple solutions on a supporting hyperplane passing on the reference set. Both Types I and 11 are very well known among DEA researchers, but previous research has not sufficiently explored a simultaneous occurrence of Type I and Type 11 in the RTS measurement. The two types of multiple solutions influence a degree of RTS in the DEA measurement. Such a quantitative issue on RTS is examined from the perspective of the Type I and Type 11 problems. To deal with such difficulties, a new linear programming approach is proposed to identify all efficient DMUs (Decision Making Units) that consist of a reference set, even if multiple solutions occur on the reference set. Based upon the research result, we can identify when multiple solutions of Type I and/or Type 11 occur on the RTS measurement and how to deal with such difficulties. Our research result makes it possible to measure a degree of scale economies (RTS) under the simultaneous occurrence of Type I and Type II. (c) 2006 Elsevier B.V. All rights reserved.