Computation of elasticity and scale effect in technical efficiency analysis of complex systems

Elasticity, the scale effect, and marginal rates are computed in technical efficiency analysis of complex systems by parametric optimization algorithms developed by the authors. It is shown that the scale effect evaluated at the vertices of a polyhedron face does not necessarily produce the scale effect on the entire face. To find the scale effect on a face of the production possibilities set it is sufficient to determine it at a single interior point on that face. The proposed approach is applied to analyze banking activities. Some modeling results are reported.