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

Z. Moghaddas, M. Vaez-Ghasemi, F. Hosseinzadeh Lot, R. Farzipoor Saen*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)915-928
Number of pages14
JournalScientia Iranica
Volume29
Issue number2 E
DOIs
Publication statusPublished - Apr 2022

Keywords

  • Big M
  • Data Envelopment Analysis (DEA)
  • Malmquist Productivity Index (MPI)
  • Mixed integer programming
  • Piece-wise linear functions
  • Revenue efficiency
  • Stepwise pricing

ASJC Scopus subject areas

  • Computer Science (miscellaneous)
  • Chemistry (miscellaneous)
  • Civil and Structural Engineering
  • Materials Science (miscellaneous)
  • Engineering(all)
  • Mechanical Engineering
  • Physics and Astronomy (miscellaneous)
  • Industrial and Manufacturing Engineering

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