Allocating a fixed cost based on data envelopment analysis and satisfaction degree

Yongjun Li (), Min Yang, Ya Chen (), Qianzhi Dai and Liang Liang

Omega, 2013, vol. 41, issue 1, 55-60

Abstract: This paper uses the Data Envelopment Analysis (DEA) technique to solve the problem of allocating a fixed cost across a set of comparable decision making units (DMUs) in a fair way. It first investigates the effect of the fixed cost on each DMU and on the collection of DMUs. Next we prove that there exist some cost allocations which can make each DMU and the collection of DMUs efficient. We show that such a cost allocation is unique and equivalent to the proportional sharing method if the fixed cost allocation problem is a one-dimensional case. In a multidimensional case, the fixed cost allocations may not be unique. This paper defines the concept of satisfaction degree, and proposes a maxmin model and a corresponding algorithm to generate a unique fixed cost allocation. Finally, the proposed approach has been applied to a data set from prior literature.

Keywords: Data envelopment analysis (DEA); Cost allocation; Efficiency; Maxmin model; Satisfaction degree (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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DOI: 10.1016/j.omega.2011.02.008

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