Fair Allocation Fixed Cost Using Cross-Efficiency Based on Pareto Concept

Hamid Sharafi (), Farhad Hosseinzadeh Lotfi, Gholam Reza Jahanshahloo () and Somayeh Razipour-GhalehJough
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Hamid Sharafi: Department of Mathematics Science and Research Branch, Islamic Azad University, Tehran, Iran
Farhad Hosseinzadeh Lotfi: Department of Mathematics Science and Research Branch, Islamic Azad University, Tehran, Iran
Gholam Reza Jahanshahloo: Department of Mathematics Science and Research Branch, Islamic Azad University, Tehran, Iran
Somayeh Razipour-GhalehJough: Department of Mathematics Science and Research Branch, Islamic Azad University, Tehran, Iran

Asia-Pacific Journal of Operational Research (APJOR), 2020, vol. 37, issue 01, 1-23

Abstract: Among homogeneous entities, there are some shared resources from which all the entities benefit. A significant point is to allocate the fixed costs of these shared resources equitably between entities. Data envelopment analysis is a technique applied for decision-making, concerning and evaluating the performance of decision-making units. One of the functions of these units is to solve the fair fixed cost allocation problem, based on the performance of a set of homogeneous decision-making units. In this paper, a method for allocating fixed costs using cross efficiency has been suggested, where the obtained result is Pareto cross-efficient. Moreover, the proposed method helps estimate the value of 𝜀 (lower bound of weights) and the mode of selecting 𝜀 for the suggested model using the standard deviation. Finally, by using a numerical example, the proposed method of allocating fixed costs is compared to the previous ones.

Keywords: Data envelopment analysis; fixed costs allocation; cross-efficiency; Pareto cross-efficient (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S0217595919500362

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