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Fixed cost allocation in two-stage system using DEA from a noncooperative view

Author

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  • Qingxian An

    (Central South University)

  • Ping Wang

    (Central South University)

  • Honglin Yang

    (Hunan University)

  • Zongrun Wang

    (Central South University)

Abstract

This paper uses the data envelopment analysis (DEA) approach to solve the issue of allocating fixed costs among a set of decision-making units (DMUs) with two-stage network structure. Fixed cost allocation is a prominent issue that is encountered by organizations, and it is one of the most important applications of DEA. It exists not only in single-stage systems but in two-stage network systems, such as bank systems in real situations, which comprises the deposits process and lending process. However, branch banks often compete with one another out of self-interest. The objective of this paper is to design a fair allocation scheme for two-stage network systems and considering the noncooperative game relationship among DMUs. The idea of satisfaction degree and noncooperative game theory is integrated into the proposed allocation model. In the noncooperative framework, we define a DMU’s payoff as the product of two substage satisfaction degree, and every member is noncooperative and selfishly seeks to maximize its own payoff. The allocation plan to DMUs and substages is determined by the final competition payoff. A real case is analyzed to illustrate the applicability of the proposed approaches.

Suggested Citation

  • Qingxian An & Ping Wang & Honglin Yang & Zongrun Wang, 2021. "Fixed cost allocation in two-stage system using DEA from a noncooperative view," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 43(4), pages 1077-1102, December.
    • Handle: RePEc:spr:orspec:v:43:y:2021:i:4:d:10.1007_s00291-021-00643-y
    DOI: 10.1007/s00291-021-00643-y
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