Allocation Models

Summary of Chapter 8

This chapter has covered the approaches which have been studied in DEA evaluations of efficiencies such as “allocative” and “overall” efficiencies. These standard approaches were also extended in models that permit substitutions so that worsening of some inputs or outputs may be made in order to improve other inputs or outputs.

Such inefficiencies are price-cost related. This can cause problems in the use of these concepts since many companies are unwilling to disclose their unit costs. Unit prices may also be a problem when these values are subject to large fluctuations. One may, of course, use averages or other summaries of such prices and also deduce or infer which unit costs are applicable. However even this may not be a satisfactory treatment in many cases like those encountered in attempts to evaluate public programs such as education, health, welfare, military or police activities and so on.

Earlier in this book a variety of approaches were suggested. This includes the case of assurance regions and like concepts, as treated in Chapter 6, which can replace the required exact knowledge of prices and costs with corresponding bounds on their values. When this is done, however, the precise relations between allocative, overall and technical efficiencies may become blurred.

These are topics which have been (and are being)researched but we do not treat them here in this book.