Cross Efficiency Analysis and Extended Facets

The purpose of this paper is to discuss some of the conclusions in a recent paper by Finn Førsund entitled “Cross Efficiency: A Critique”. Finn Førsund is criticizing cross-efficiency for lack of economic foundation. I build on extended facet analysis to provide an economic interpretation of each of the different cross-efficiency scores that enters into the “peers’ appraisal cross-efficiency averages” of unit j, denoted ECOL(j) in the paper. However, when I consider this new economic interpretation, I end up agreeing with Finn Førsund that it is very difficult to see any meaningful interpretation of these “peers’ appraisal cross-efficiency averages”.