Abstract
This paper proposes a new proportional-sharing approach for fixed cost allocation (FCA) among a group of decision-making units (DMUs) based on data envelopment analysis (DEA). We first prove the proportional invariance in DEA-based FCA. Then, we show that the “all-efficient” assumption in existing models usually leads to the use of unrealistic weights in efficiency analysis. To address this issue, we relax this assumption and adopt a weight constraint approach. Further, we illustrate that some DMUs would always be allocated with zero fixed cost if only the goal of efficiency maximizing is considered. Therefore, some weight constraints are added, and a new bi-objective model is proposed to allocate the fixed cost among the DMUs in order to simultaneously maximize the efficiencies of the DMUs and make the allocation as close as possible to the one generated according to the DMUs’ operation sizes. A mono-objective nonlinear program, which can be solved using dichotomy and a linear program solver, is used to obtain a non-dominated or Pareto-optimal trade-off solution for the bi-objective model. With the use of our approach, neither unrealistic weights nor zero fixed cost appears in the result. Finally, the proposed approach is applied to a numerical example and a commercial bank case study.
Similar content being viewed by others
References
An Q, Wang P, Emrouznejad A, Hu J (2020) Fixed cost allocation based on the principle of efficiency invariance in two-stage systems. Eur J Oper Res 283(2):662–675
An Q, Wang P, Yang H, Wang Z (2021) Fixed cost allocation in two-stage system using DEA from a noncooperative view. Or Spectrum 43:1077–1102
Beasley JE (2003) Allocating fixed costs and resources via data envelopment analysis. Eur J Oper Res 147(1):198–216
Charnes A, Cooper WW (1962) Programming with linear fractional functionals. Nav Res Logist Q 9(3–4):181–186
Charnes A, Cooper WW, Rhodes E (1978) Measuring the efficiency of decision-making units. Eur J Oper Res 2(6):429–444
Chu J, Wu J, Chu C, Zhang T (2020) DEA-based fixed cost allocation in two-stage systems: leader-follower and satisfaction degree bargaining game approaches. Omega 94:102054
Chu J, Su W, Li F, Yuan Z (2022) Individual rationality and overall fairness in fixed cost allocation: an approach under DEA cross-efficiency evaluation mechanism. J Oper Res Soc 66:1–16
Cook WD, Kress M (1999) Characterizing an equitable allocation of shared costs: a DEA approach. Eur J Oper Res 119(3):652–661
Cook WD, Zhu J (2005) Allocation of shared costs among decision making units: a DEA approach. Comput Oper Res 32(8):2171–2178
Dai Q, Li Y, Lei X, Wu D (2021) A DEA-based incentive approach for allocating common revenues or fixed costs. Eur J Oper Res 292(2):675–686
Ding T, Zhu Q, Zhang B, Liang L (2019) Centralized fixed cost allocation for generalized two-stage network DEA. INFOR Inf Syst Oper Res 57(2):123–140
Du J, Cook WD, Liang L, Zhu J (2014) Fixed cost and resource allocation based on DEA cross-efficiency. Eur J Oper Res 235(1):206–214
Jahanshahloo GR, Lotfi FH, Shoja N, Sanei M (2004) An alternative approach for equitable allocation of shared costs by using DEA. Appl Math Comput 153(1):267–274
Jahanshahloo GR, Sadeghi J, Khodabakhshi M (2017) Proposing a method for fixed cost allocation using DEA based on the efficiency invariance and common set of weights principles. Math Methods Oper Res 85(2):223–240
Li Y, Yang M, Chen Y, Dai Q, Liang L (2013) Allocating a fixed cost based on data envelopment analysis and satisfaction degree. Omega 41(1):55–60
Li F, Song J, Dolgui A, Liang L (2017) Using common weights and efficiency invariance principles for resource allocation and target setting. Int J Prod Res 55(17):4982–4997
Li F, Zhu Q, Liang L (2018) Allocating a fixed cost based on a DEA-game cross efficiency approach. Expert Syst Appl 96:196–207
Li F, Zhu Q, Liang L (2019a) A new data envelopment analysis based approach for fixed cost allocation. Ann Oper Res 274(1–2):347–372
Li F, Zhu Q, Chen Z (2019b) Allocating a fixed cost across the decision-making units with two-stage network structures. Omega 83:139–154
Li Y, Li F, Emrouznejad A, Liang L, Xie Q (2019c) Allocating the fixed cost: an approach based on data envelopment analysis and cooperative game. Ann Oper Res 274(1–2):373–394
Lin R (2011) Allocating fixed costs or resources and setting targets via data envelopment analysis. Appl Math Comput 217(13):6349–6358
Mostafaee A (2013) An equitable method for allocating fixed costs by using data envelopment analysis. J Oper Res Soc 64(3):326–335
Özpeynirci S, Özpeynirci Ö, Mousseau V (2021) An interactive algorithm for resource allocation with balance concerns. Or Spectr 43:983–1005
Ramón N, Ruiz JL, Sirvent I (2010) On the choice of weights profiles in cross-efficiency evaluations. Eur J Oper Res 207(3):1564–1572
Ramón N, Ruiz JL, Sirvent I (2011) Reducing differences between profiles of weights: a “peer-restricted” cross-efficiency evaluation. Omega 39(6):634–641
Si X, Liang L, Jia G, Yang L, Wu H, Li Y (2013) Proportional sharing and DEA in allocating the fixed cost. Appl Math Comput 219(12):6580–6590
Wu J, Sun J, Liang L (2012) Cross efficiency evaluation method based on weight-balanced data envelopment analysis model. Comput Ind Eng 63(2):513–519
Yu MM, Chen LH, Hsiao B (2016) A fixed cost allocation based on the two-stage network data envelopment approach. J Bus Res 69(5):1817–1822
Zhu W, Zhang Q, Wang H (2019) Fixed costs and shared resources allocation in two-stage network DEA. Ann Oper Res 278(1–2):177–194
Acknowledgements
The authors are sincerely grateful for the suggestions and comments given by the two anonymous reviewers. The research is supported by the National Natural Science Foundation of China (Nos. 72271247, 72102234, and 71901225), the Natural Science Foundation of Hunan Province (No. 2021JJ40800), and Zhejiang General Soft Science Research Project (No. 2023C35078).
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.
About this article
Cite this article
Chu, J., Su, W., Wu, J. et al. DEA-based proportional-sharing fixed cost allocation considering bi-objective optimization. OR Spectrum 45, 1333–1360 (2023). https://doi.org/10.1007/s00291-023-00727-x
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00291-023-00727-x