Combining efficiency and scaling effects in activity analysis: towards an improved best practice criterion

Efficiency is the main issue in any data envelopment analysis. Realizing output by a minimum of input or reaching maximum given credo, scale effects often are only sort accessory. In modern economics play prominent role, however. What right size decision making unit (DMU) and how to proceed there. Returns inform DMU about its hitherto disregard show way towards ideal activity size. Combining efficiency aspects scaling leads new DEA–best practice criterion DMUs gives them profound orientation their current position. This combination turns out be relation weighted outputs inputs—in optimal prices under variable returns (VRS). It VRS–productivity. For with increasing recommended growth path accordance economic rationales, for decreasing shrinking uncovers severe flaws VRS–models needs adjustment. All theoretical considerations illustrated little numerical examples. A real world application 37 Brazilian banks demonstrates benefits concept.