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Fair Allocation Fixed Cost Using Cross-Efficiency Based on Pareto Concept

Author

Listed:
  • Hamid Sharafi

    (Department of Mathematics Science and Research Branch, Islamic Azad University, Tehran, Iran)

  • Farhad Hosseinzadeh Lotfi

    (Department of Mathematics Science and Research Branch, Islamic Azad University, Tehran, Iran)

  • Gholam Reza Jahanshahloo

    (Department of Mathematics Science and Research Branch, Islamic Azad University, Tehran, Iran)

  • Somayeh Razipour-GhalehJough

    (Department of Mathematics Science and Research Branch, Islamic Azad University, Tehran, Iran)

Abstract

Among homogeneous entities, there are some shared resources from which all the entities benefit. A significant point is to allocate the fixed costs of these shared resources equitably between entities. Data envelopment analysis is a technique applied for decision-making, concerning and evaluating the performance of decision-making units. One of the functions of these units is to solve the fair fixed cost allocation problem, based on the performance of a set of homogeneous decision-making units. In this paper, a method for allocating fixed costs using cross efficiency has been suggested, where the obtained result is Pareto cross-efficient. Moreover, the proposed method helps estimate the value of 𝜀 (lower bound of weights) and the mode of selecting 𝜀 for the suggested model using the standard deviation. Finally, by using a numerical example, the proposed method of allocating fixed costs is compared to the previous ones.

Suggested Citation

  • Hamid Sharafi & Farhad Hosseinzadeh Lotfi & Gholam Reza Jahanshahloo & Somayeh Razipour-GhalehJough, 2020. "Fair Allocation Fixed Cost Using Cross-Efficiency Based on Pareto Concept," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 37(01), pages 1-23, January.
    • Handle: RePEc:wsi:apjorx:v:37:y:2020:i:01:n:s0217595919500362
    DOI: 10.1142/S0217595919500362
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    References listed on IDEAS

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