NONRADIAL APPROACH TO ALLOCATING FIXED-COSTS AND COMMON REVENUE USING CENTRALIZED DEA

In this paper, a simple approach to allocating fixed costs and common revenue among different units is presented. It is based on centralized data envelopment analysis (DEA) and uses a weighted, slacks-based, nonradial metric. The approach is units-invariant and takes into account the inefficiencies in the assessed decision making units (DMUs). The approach works when the fixed cost is a complement of another input as well as when no other inputs exist. The proposed approach is compared with existing allocation methods using several datasets from the literature.