Open Access Articles

Fixed Cost Allocation in the Presence of Undesirable Outputs in DEA

Authors

Javad Gerami * Department of Mathematics, Shiraz branch, Islamic Azad University, Shiraz, Iran.
Maryam Eftekharian Jahromi Department of Mathematics, Shiraz branch, Islamic Azad University, Shiraz, Iran.

https://doi.org/10.22105/raise.v1i2.43

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Abstract

In this paper, we present a fixed cost allocation plan based on a Directional Distance Function (DDF) model in the presence of undesirable outputs in Data Envelopment Enalysis (DEA). The use of a DDF help for the accommodation of undesirable indicators in their original form. We propose a fixed cost allocation based on the the principle of full-efficient mechanism. This approach guarantees that the efficiency scores of Decision-Making Units (DMUs) will be equql to one after the allocation of fixed cost. By choosing different direction vectors, we can flexibly change the fixed cost allocation plan and the cost allocated to the units will also change. The proposed fixed cost allocation plan allocated cost among efficient and inefficient units. We illustrate the results of the proposed approach with a numerical example, and the results of the models are presented.

Keywords

Data envelopment analysis Fixed cost allocation Undesirable outputs

References (34)

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Published 2024-08-23
Issue Vol. 1 No. 2 (2024): Research Annals of Industrial and Systems Engineering
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How to Cite

Gerami, J. ., & Eftekharian Jahromi, M. (2024). Fixed Cost Allocation in the Presence of Undesirable Outputs in DEA. Research Annals of Industrial and Systems Engineering, 1(2), 88-95. https://doi.org/10.22105/raise.v1i2.43

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