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

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 [Formula: see text] (lower bound of weights) and the mode of selecting [Formula: see text] 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.