Fixed Cost and Resource Allocation Considering Technology Heterogeneity in Two-Stage Network Production Systems

Many studies have concentrated on fixed cost allocation and resource allocation issues by using data envelopment analysis (DEA). Existing approaches allocate fixed cost and resource primary based on the efficiency maximization principle. 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 chapter, under the centralized decision environment, we present a new approach to deal with fixed cost and resource allocation issues for a two-stage production system by considering the factor of technology heterogeneity. Specifically, technology difference is analyzed in the performance evaluation framework firstly. Then, by taking the technology heterogeneity into account, the two-stage DEA-based fixed cost allocation and resource allocation models are proposed. In addition, two illustrated examples are calculated to show the feasibility of the two proposed models. Finally, this chapter is concluded.