A generalized data envelopment analysis approach for fixed cost allocation with preference information

Abstract

Exploring a commonly acceptable fixed cost allocation (FCA) scheme is a challenging yet significant task, since one may contend with conflicting objectives. In this paper, we propose a new data envelopment analysis based FCA technique. The proposed approach aims to balance individual efficiency guarantees and collective preference objectives simultaneously. Particularly, a preference value loss (PVL) index is explicitly constructed to quantify the impact of preference considerations. Moreover, our generalized FCA strategy guarantees a minimal PVL and provides a reasonable and realizable lexicographic evaluation procedure to single out the final FCA scheme. Interestingly, the efficiency invariance and efficiency variance approaches from the prior literature are special cases of our proposed approach. Finally, the proposed approach is validated with a numerical example and an empirical application to bank maintenance fee distribution.