A DEA‐based method of allocating the fixed cost as a complement to the original input. (14th December 2017)

• Record Type: Journal Article
• Authors: Lin, Ruiyue; Chen, Zhiping
• Other Names: De Witte Kristof guestEditor.; Johnes Geraint guestEditor.; Johnes Jill guestEditor.; Agasisti Tommaso guestEditor.
• Is Part Of: International transactions in operational research. Volume 27:Number 4(2020)
• Page Start: 2230
• Page End: 2250
• Publication Date: 2017-12-14
• Subjects: data envelopment analysis -- fixed cost allocation -- complementary input -- efficiency -- uniqueness; Operations research -- Periodicals; 003
• DOI: 10.1111/itor.12495
• Languages: English
• ISSNs: 0969-6016

Abstract

Abstract: This paper focuses on the problem of how to divide a fixed cost as a complement to an original input among decision‐making units (DMUs) equitably. Using the data envelopment analysis (DEA) technique, this paper concerns the problem from the perspective of efficiency analysis. It is found that not all DMUs can become efficient under common weights if a low enough fixed cost is assigned. Therefore, the global modified additive DEA (MAD) model is introduced. By optimizing the global MAD‐efficiency, a new allocation method and the corresponding algorithm to ensure the uniqueness of the allocation result is designed. The proposed method can be used under both constant returns to scale and variable returns to scale for nonnegative data; it is suitable for the situation where the costs play a great role in the production of DMUs. Numerical results show the validity and advantages of our method.