Determination of scale elasticity in the existence of non-discretionary factors in performance analysis

Discretionary models of data envelopment analysis (DEA) assume that all inputs and outputs can be varied at the discretion of management or other users. In any realistic situation, however, there may exist “exogenously fixed” or non-discretionary factors that are beyond the control of a DMU’s management, which also need to be considered. In this paper, Banker’s definition of scale elasticity and returns to scale is modified so that it includes the non-discretionary factors, as well. Then, an efficient algorithm which is capable of determining scale elasticity in the existence of non-discretionary factors is provided.