Fixed cost allocation based on the principle of efficiency invariance in two-stage systems

Abstract

Fixed cost allocation among groups of entities is a prominent issue in numerous organisations. Addressing this issue has become one of the most important topics of the data envelopment analysis (DEA) methodology. In this study, we propose a fixed cost allocation approach for basic two-stage systems based on the principle of efficiency invariance and then extend it to general two-stage systems. Fixed cost allocation in cooperative and noncooperative scenarios are investigated to develop the related allocation plans for two-stage systems. The model of fixed cost allocation under the overall condition of efficiency invariance is first developed when the two stages have a cooperative relationship. Then, the model of fixed cost allocation under the divisional condition of efficiency invariance wherein the two stages have a noncooperative relationship is studied. Finally, the validation of the proposed approach is demonstrated by a real application of 24 nonlife insurance companies, in which a comparative analysis with other allocation approaches is included.

Publication DOI: https://doi.org/http://10.1016/j.ejor.2019.11.031
Divisions: Aston Business School > Operations & Information Management
Aston Business School
Additional Information: © 2019, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/ Funding: National Natural Science Foundation of China (Nos. 71871223, 91846301, 71631008), Innovation‐Driven Planning Foundation of Central South University (2019CX041), Major Project for National Natural Science Foundation of China (71790615).
Uncontrolled Keywords: Cooperative model,Data envelopment analysis,Efficiency invariance principle,Fixed cost allocation,Noncooperative model,Computer Science(all),Modelling and Simulation,Management Science and Operations Research,Information Systems and Management
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Related URLs: https://linking ... 377221719309427 (Publisher URL)
http://www.scop ... tnerID=8YFLogxK (Scopus URL)
PURE Output Type: Article
Published Date: 2019-11-20
Published Online Date: 2019-11-20
Accepted Date: 2019-11-15
Authors: An, Qingxian
Wang, Ping
Emrouznejad, Ali ( 0000-0001-8094-4244)
Hu, Junhua

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Version: Accepted Version

Access Restriction: Restricted to Repository staff only until 20 November 2021.

License: Creative Commons Attribution Non-commercial No Derivatives


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