Finding strong defining hyperplanes of PPS using multiplier form

Abstract

The production possibility set (PPS) is defined as the set of all inputs and outputs of a system in which inputs can produce outputs. In this paper, we deal with the problem of finding the strong defining hyperplanes of the PPS. These hyperplanes are equations that form efficient surfaces. It is well known that the optimal solutions of the envelopment formulation for extreme efficient units are often highly degenerate and, therefore, may have alternate optima for the multiplier form. Every optimal solution of the multiplier form yields a hyperplane which is supporting at the PPS. We will show that the hyperplane which corresponds to an extreme optimal solution of the multiplier form (in evaluating an efficient DMU), and whose components corresponding to inputs and outputs are non zero is a strong defining hyperplane of the PPS. This will be discussed in details in this paper. These hyperplanes are useful in sensitivity and stability analysis, the status of returns to scale of a DMU, incorporating performance into the efficient frontier analysis, and so on. Using numerical examples, we will demonstrate how to use the results.