Fair Allocation of Fixed Costs in Data Envelopment Analysis

Data Envelopment Analysis (DEA) technique is a mathematical programming to evaluate the performance of a set of homogeneous decision making units (DMUs) with multiple inputs and outputs. One of DEA’s applications is to allocate the fixed resources and to target among DMUs in a fair way. In this manuscript, a novel and practical model is developed to allocate the fixed costs. In the proposed method, each DMU first determines both the minimum and maximum values that can participate in the payment of the fixed costs so that the efficiency of itself and other units after the allocation of fixed costs is equal to one of the efficiency before the allocation of the fixed costs. Then, a convex combination of the minimum and maximum values is considered as the amount of the allocated cost to each unit. Ultimately, both the efficiency and applicability of the proposed method are investigated using a numerical example.