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A DEA‐based method of allocating the fixed cost as a complement to the original input
Author(s) -
Lin Ruiyue,
Chen Zhiping
Publication year - 2020
Publication title -
international transactions in operational research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.032
H-Index - 52
eISSN - 1475-3995
pISSN - 0969-6016
DOI - 10.1111/itor.12495
Subject(s) - data envelopment analysis , complement (music) , mathematical optimization , returns to scale , uniqueness , variable (mathematics) , computer science , fixed cost , constant (computer programming) , production (economics) , scale (ratio) , mathematics , economics , microeconomics , mathematical analysis , biochemistry , chemistry , physics , quantum mechanics , complementation , programming language , gene , phenotype
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.