The role of elasticity measures for characterizing anchor points in DEA

Abstract

As an important concept in data envelopment analysis (DEA), elasticity measure has wide theoretical and practical applications in formulating various economic concepts. Anchor points also appear to be particularly interesting and highly useful in DEA, especially for recognizing a decision making unit (DMU) as a benchmark. This paper is an attempt to use left-and right-hand elasticity measures to present a novel definition (characterization) for anchor points. The study results reveal that if there exists an increase in a bundle of input with no rate of change in a bundle of output or if there is a decrease in a bundle of output, but a bundle of input has no rate of change, then such an extreme point is the anchor point.