MARGINAL RATES AND 2-DIMENSIONAL LEVEL CURVES IN DEA

Of great importance to management, the computation of trade-offs prese nts particular difficulties within DEA since the piecewise linear natu re of the envelopment surfaces does not allow for unique derivatives a t every point. We present a comprehensive framework for analyzing marg inal rates, and directional derivatives in. general, on DEA frontiers, A useful characterization of these derivatives at given points can be provided in terms of the ranges they can take; equivalently, the boun ds of these ranges correspond to derivatives ''to the right'' and ''to the left'' at these points. We present two approaches for their compu tation: first, the dual equivalents calculation of minimum and maximum multiplier ratios/finite differences, and then a modified simplex tab leau method. The simpler, tableau method provides a more general appli cation of the method introduced by Hackman et al, (1994) to generate a ny two-dimensional section of the isoquant and is a practical tool to generate level plots of the frontier. By giving a complete picture of tradeoffs and allowing a better visualization of high dimensional prod uction possibility sets, these tools can be very useful for managerial applications.