This chapter1 discusses the economic concept of “congestion.”2 It is a widely observed phenomenon that identifies inefficiency in such a manner that any reduction in an input(s) results in an increase in a desirable output(s) without worsening other inputs and desirable outputs (Cooper et al., 2004). Conversely, congestion implies that any increase in an input(s) decreases the desirable output(s) without worsening other production factors. This type of inefficiency is clearly different from the concept of “operational inefficiency” discussed in previous chapters, which indicates the existence of an excess amount of input(s) and/or a shortfall of desirable output(s). A typical example can be found in the line capability limit of electric power transmission. Another example is the transportation capacity limit on a pipeline network between upstream and downstream in a petroleum industry.
Several previous studies (e.g., Färe et al., 1985) paid attention to the occurrence of congestion in DEA. The concept is defined as “evidence of congestion is present when reductions in one or more inputs can be associated with increases in one or more desirable outputs, or in reverse, when increases in one or more inputs can be associated with decreases in one or more desirable outputs, without worsening any other input or desirable output.” See Cooper et al. (2001b) on the definition on congestion within a conventional framework of DEA.
Two groups of researchers have argued ...