Centralized fixed cost and resource allocation considering technology heterogeneity: a DEA approach

Abstract

Many studies have concentrated on fixed cost and resource allocation issues by using data envelopment analysis (DEA). The existing approaches allocate fixed cost or resource primary based on efficiency principle. They usually assume that all of the DMUs become efficient after fixed cost or resource allocation. However, due to the existing of technology heterogeneity among DMUs, it is impractical for all the DMUs to achieve a common technology level, especially when some DMUs are far from the efficient frontier. In this paper, under the centralized decision environment, we present a new approach to deal with fixed cost and resource allocation problems by considering the factor of technology heterogeneity. Specifically, the concepts of meta-efficiency and group efficiency as well as meta-technology ratio are firstly introduced to reflect the technology level of the DMUs. Then two centralized DEA models considering technology heterogeneity are proposed to allocate fixed cost and resources, respectively. Finally, two numerical examples are presented to illustrate the feasibility and superiority of the proposed approach compared with prior studies.