Cost Allocation and Convex Data Envelopment
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Cost Allocation and Convex Data Envelopment. / Hougaard, Jens Leth; Tind, Jørgen.
Department of Economics, University of Copenhagen, 2008.Research output: Working paper › Research
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TY - UNPB
T1 - Cost Allocation and Convex Data Envelopment
AU - Hougaard, Jens Leth
AU - Tind, Jørgen
PY - 2008
Y1 - 2008
N2 - This paper considers allocation rules. First, we demonstrate that costs allocated by the Aumann-Shapley and the Friedman-Moulin cost allocation rules are easy to determine in practice using convex envelopment of registered cost data and parametric programming. Second, from the linear programming problems involved it becomes clear that the allocation rules, technically speaking, allocate the non-zero value of the dual variable for a convexity constraint on to the output vector. Hence, the allocation rules can also be used to allocate inefficiencies in non-parametric efficiency measurement models such as Data Envelopment Analysis (DEA). The convexity constraint of the BCC model introduces a non-zero slack in the objective function of the multiplier problem and we show that the cost allocation rules discussed in this paper can be used as candidates to allocate this slack value on to the input (or output) variables and hence enable a full allocation of the inefficiency on to the input (or output) variables as in the CCR model
AB - This paper considers allocation rules. First, we demonstrate that costs allocated by the Aumann-Shapley and the Friedman-Moulin cost allocation rules are easy to determine in practice using convex envelopment of registered cost data and parametric programming. Second, from the linear programming problems involved it becomes clear that the allocation rules, technically speaking, allocate the non-zero value of the dual variable for a convexity constraint on to the output vector. Hence, the allocation rules can also be used to allocate inefficiencies in non-parametric efficiency measurement models such as Data Envelopment Analysis (DEA). The convexity constraint of the BCC model introduces a non-zero slack in the objective function of the multiplier problem and we show that the cost allocation rules discussed in this paper can be used as candidates to allocate this slack value on to the input (or output) variables and hence enable a full allocation of the inefficiency on to the input (or output) variables as in the CCR model
KW - Faculty of Social Sciences
KW - convex envelopment
KW - ata envelopment analysis
KW - slack allocation
M3 - Working paper
BT - Cost Allocation and Convex Data Envelopment
PB - Department of Economics, University of Copenhagen
ER -
ID: 2401421