Abstract
Having based his incentivisation strategy on cost reimbursement, Bogetoft developed an incentive formula. Given that inputs are typically costs, different input-oriented methods were proposed to estimate the parameters of the incentive formula. Recently, several radial-based input-oriented super-efficiency measures have been developed in the centralized resource allocation (CRA) context for estimation of the incentive formula parameters. We show, using examples, that input-oriented incentive methods can lead to unfair incentive mechanisms. It transpires that fair incentive mechanisms can be achieved via non-oriented methods. To this end, we propose an non-oriented slacks-based super-efficiency method in the CRA context using which we estimate the incentive formula parameters. Given that the slacks-based measures can distinguish between weak and strong efficient units, such measures do not suffer from the known deficiencies of the radial CRA-based incentive methods. The validity and applicability of the proposed approach are demonstrated using a real dataset. We consider percentage of relative returns, and use statistical indices and visualization techniques to compare the incentive plans obtained from the proposed method with those resulted from other existing CRA-based incentive methods.
Acknowledgements
The authors would like to express their sincere thanks to the Editor, the AE who handled our submission and four referees for their constructive comments.
Notes
1 Lozano and Villa (Citation2004) introduced the concept of centralized resource allocation (CRA) to enhance the overall performance of centralized organizations. Following this seminal work, several other methods were proposed in the CRA context, see Lozano and Villa (Citation2005), Fang and Zhang (Citation2008), Asmild et al. (Citation2009), Lotfi et al. (Citation2010), Fang (Citation2013), Mar-Molinero et al. (Citation2014), Zhang et al. (Citation2015), Agrell and Bogetoft (Citation2016), Fang (Citation2016), Hakim et al. (Citation2016), Dehnokhalaji et al. (Citation2017), and Afsharian (Citation2019a), among others.
2 Radial-based models cannot measure both inefficiencies, i.e. technical and mix.
3 It should be noted that among all CRA-based incentive methods only Afsharian et al. (Citation2017) yields Pareto optimal solutions by restricting the input/output weights to be strictly positive.
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Funding
Masoud Asgharian is supported by the Natural Science and Engineering Research Council (NSERC) of Canada [NSERC RGPIN-2018-05618]. The first author would like to acknowledge the financial support of University of Kashan for this research under grant number 1077023.
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