Fixed cost allocation in bank branches: A network DEA approach

Data Envelopment Analysis (DEA) approach is a mathematical method of exploring homogeneous decision-making units (DMUs). The structure of DMUs may have multiple steps, where one of the steps employs the output of another as its input. Manufacturing operations and industrial systems, in particular, use multi-stage structures. This study addresses the topic of constant cost distribution in a specific type of two-stage system. First, a set of common weights and sized-based allocations are performed. Eventually, a min-max approach is established to decrease the difference between efficient and size-based allocations. Researching banking issues is very important because banks can highly affect the economic growth of countries.The proposed method for determining fixed cost allocation in bank branches has been performed on ۳۷ branches of Iranian banks.The fixed cost was allocated based on the aggregate of inputs and outputs of the bank branches and all DMUs and subphases became efficient after fixed cost allocation.

Keywords:

Data envelopment analysis (DEA) , Fixed-cost allocation , Two-stage process , operation size , min-max model