Average-Revenue Efficiency and Optimal Scale Sizes in Environmental Analysis

Due to the changes of performance measures, a vital aspect for decision makers is finding optimal scale sizes of entities. Moreover, there are undesirable measures in many investigations. In the existing data envelopment analysis (DEA) approaches, optimal scale sizes (OSSs), average-cost efficiency (ACE) and average-revenue efficiency (ARE) of decision making units (DMUs) with desirable measures under strong disposability have been estimated while undesirable factors are presented in many real world examinations. Accordingly, in this research, OSSs and ARE of DMUs with undesirable outputs are addressed under managerial disposability. ARE is defined as the composite of scale and output allocative efficiencies under managerial disposability. To illustrate in detail, a two-stage DEA-based approach is rendered to estimate ARE and OSSs in the presence of undesirable outputs. A numerical example and an illustrative case are given to explain the proposed approach in this study.