Cost Efficiency Analysis of Heterogeneous Network Processes

Cost efficiency in network systems has been addressed in the existing data envelopment analysis (DEA) approaches considering homogeneous technology. Due to the presence of the heterogeneity of production technologies in different network processes, this paper attempts to develop the meta-frontier network DEA models to analyze convex and non-convex meta frontier cost efficiencies. Technological gaps can influence the overall production frontier due to technological gaps of the stages one and two. The group cost efficiency and meta cost efficiency are assessed to establish cost gap ratios of systems. The proposed approach is clarified using an application of soft drinks companies presented in the literature. The results show the usefulness of the provided approach in this paper to assess the cost efficiency of heterogeneous network processes and to estimate cost gap ratios and meta cost inefficiency sources.