A Restricted Data Envelopment Analysis Application to Dairy Farming
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2. Methodological Approach
In this study the technical efficiency level of dairy farms in Greece is estimated by imposing weight restrictions on the conventional data envelopment analysis (DEA) model. The assurance region approach is applied on farm record and accounting data from 165 dairy farms. The numerical values of the weight bounds are determined by placing limits on the estimated output elasticities and on the factors’ cost share of the total production cost. The imposition of bounds on the DEA weights provides more persuasive efficiency scores and alters the structure of the efficient farms, verifying the importance of placing weight restrictions when dealing with real-life applications.