A new approach for allocating fixed costs among decision making units
Ruiyue Lin Zhiping Chen Zongxin Li
Journal of Industrial & Management Optimization 2016, 12(1): 211-228 doi: 10.3934/jimo.2016.12.211
How to equitably distribute a common fixed cost among decision making units (DMUs) of an organization is a typical problem in organization management. Based on the data envelopment analysis technique, this paper proposes a new proportional sharing model to determine a unique fixed cost allocation under two assumptions: efficiency invariance and zero slack. It is noteworthy that the fixed cost allocation determined by our proportional sharing model is a feasible solution to the model proposed by Cook and Zhu [Cook and Zhu, Allocation of shared costs among decision making units: A DEA approach, Computers & Operations Research, 32 (2005) 2171-2178]. To ensure the uniqueness of the fixed cost allocation, three algorithms are proposed under the new model. Different from current fixed cost allocation methods under the efficiency invariance assumption, our approach can generate a fixed cost allocation that is unique, partially dependent of DMUs' inputs and units-invariant, and thus is more effective. Numerical examples are used to illustrate the validity and superiorities of our approach.
keywords: units-invariance. efficiency invariance Data envelopment analysis fixed cost allocation uniqueness
Time consistent policy of multi-period mean-variance problem in stochastic markets
Zhiping Chen Jia Liu Gang Li
Journal of Industrial & Management Optimization 2016, 12(1): 229-249 doi: 10.3934/jimo.2016.12.229
Due to the non-separability of the variance operator, the optimal investment policy of the multi-period mean-variance model in Markovian markets doesn't satisfy the time consistency. We propose a new weak time consistency in stochastic markets and show that the pre-commitment optimal policy satisfies the weak time consistency at any intermediate period as long as the investor's wealth is no more than a specific threshold. When the investor's wealth exceeds the threshold, the weak time consistency no longer holds. In this case, by modifying the pre-commitment optimal policy, we derive a wealth interval, from which we determine a more efficient revised policy. The terminal wealth obtained under this revised policy can achieve the same mean as, but not greater variance than those of the terminal wealth obtained under the pre-commitment optimal policy; a series of superior investment policies can be obtained depending on the degree the investor wants the conditional variance to decrease. It is shown that, in the above revising process, a positive cash flow can be taken out of the market. Finally, an empirical example illustrates our theoretical results. Our results generalize existing conclusions for the multi-period mean-variance model in deterministic markets.
keywords: policy revision. Markovian markets Bellman's optimality principle mean-variance Time inconsistency

Year of publication

Related Authors

Related Keywords

[Back to Top]