Characterizing an equitable allocation of shared costs: A data envelopment analysis approach

Characterizing an equitable allocation of shared costs: A data envelopment analysis approach

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Article ID: iaor20003850
Country: Netherlands
Volume: 119
Issue: 3
Start Page Number: 652
End Page Number: 661
Publication Date: Dec 1999
Journal: European Journal of Operational Research
Authors: ,
Abstract:

In many applications to which DEA could be applied, there is often a fixed or common cost which is imposed on all decision making units. This would be the case, for example, for branches of a bank which can be accessed via the numerous automatic teller machines scattered throughout the country. A problem arises as to how this cost can be assigned in an equitable way to the various DMUs. In this paper we propose a DEA approach to obtain this cost allocation which is based on two principles: invariance and pareto-minimality. It is shown that the proposed method is a natural extension of the simple one-dimensional problem to the general multiple-input multiple-output case.

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