Stepwise pricing in evaluating revenue efficiency in data envelopment analysis: A case study of power plants

Data Envelopment Analysis (DEA) technique is widely applied for performance assessment of Decision-Making Units (DMUs). Revenue Efficiency (RE) evaluation is one of the controversial subject matters that can be performed through DEA context. The amount of production and its prices are crucial factor...

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Published inScientia Iranica. Transaction E, Industrial engineering Vol. 29; no. 2; pp. 915 - 928
Main Authors Moghaddas, Z, Vaez-Ghasemi, M, Lotfi, F Hosseinzadeh, Saen, R Farzipoor
Format Journal Article
LanguageEnglish
Published Tehran Sharif University of Technology 01.04.2022
Subjects
Case studies
Data analysis
Data envelopment analysis
Decision analysis
Decision making
Efficiency
Integer programming
Linear programming
Mathematical models
Optimization models
Performance assessment
Power plants
Prices
Pricing
Productivity
Revenue
Variables
Weighting functions
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Summary:Data Envelopment Analysis (DEA) technique is widely applied for performance assessment of Decision-Making Units (DMUs). Revenue Efficiency (RE) evaluation is one of the controversial subject matters that can be performed through DEA context. The amount of production and its prices are crucial factors in the RE. The classical DEA models consider the prices fixed and known, which are not the case in the real world. Also, the classical DEA models consider linear pricing in revenue assessment. However, most of real-world problems deal with nonlinear prices. This paper evaluates the RE given the piecewise linear theory in non-competitive situations. In doing so, a stepwise pricing function is introduced that allows the prices to vary with respect to the amount of production. As an innovative idea, a more accurate mathematical modeling for the RE is proposed. A dynamic weight function is defined in the maximum revenue optimization model that no longer considers prices fixed. A case study validates our proposed model.
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DOI:10.24200/sci.2020.55350.4184