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Cost efficiency and congestion analysis in pharmaceutical firms: A two-stage DEA framework
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M. Outougari   , F. Hosseinzadeh Lotfi , M. Rostamy-Malkhalifeh , T. Allahviranloo |
| Department of Mathematics, SR.C., Islamic Azad University, Tehran, Iran |
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Abstract: (20 Views) |
This study proposes a two-stage integrated data envelopment analysis (DEA) framework to evaluate cost efficiency and identify cost congestion in decision-making units (DMUs). The framework reflects real production conditions by considering discretionary and non-discretionary inputs, as well as desirable and undesirable outputs. In the first stage, a cost-oriented DEA model measures the cost efficiency of DMUs while accounting for non-discretionary inputs. Cost-efficient units are identified and used as benchmark reference units. In the second stage, a diagnostic procedure is introduced to detect and quantify cost congestion in inefficient DMUs relative to the efficient benchmarks. Cost congestion refers to situations where excessive use of discretionary inputs leads to reduced output performance. The framework is applied to pharmaceutical companies as an empirical case. The results show that cost inefficiency is not always due to poor management, and some inefficient DMUs experience significant cost congestion. In such cases, increasing inputs worsens performance instead of improving it. The magnitude of congestion is explicitly quantified, enabling a clear distinction between managerial inefficiency and structural congestion. The proposed approach provides a benchmark-based method for congestion identification and integrates cost efficiency and congestion analysis into a unified DEA framework. This contributes to the DEA literature under heterogeneous production conditions.
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| Keywords: Cost Efficiency, Data Envelopment Analysis, Cost Congestion, Non-Discretionary Inputs, Undesirable Outputs. |
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Full-Text [PDF 4545 kb]
(4 Downloads)
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Type of Study: Research |
Subject:
General
Received: 2026/04/21 | Accepted: 2026/06/6 | Published: 2026/07/10
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