Evaluating returns to scale and congestion by production possibility set in intersection form

This research proposes a new method to estimate returns to scale (RTS) of decision making units (DMUs) with multiple inputs and outputs. The state of return to scale includes increasing RTS, constant RTS, decreasing RTS and evidence of congestion. The method is based on the production possibility set in the intersection form given by a set of linear inequalities. We propose and prove the necessary and sufficient conditions for the RTS estimation. With the new procedure, to estimate the RTS of a DMU is simply to check the position of the DMU on the production frontiers. We point out that the procedure is particularly important for dealing with a large number of DMUs. Therefore, it can be regarded as a complementary to the data mining.