Restricted reallocation of resources

This paper investigates restricted reallocation among individual units when the efficiency index is calculated for an aggregated unit in the DEA framework. Moreover, we address the question of the optimal reallocation flow – the optimal flow of inputs among the individual units subject to given transfer costs. Restrictions on reallocation can be given by the maximum cost the managers are willing to pay. In the framework of full reallocation there is a trade-off between the maximum allowed reallocation cost and the highest efficiency the aggregated unit can achieve. The final goal is to present a way to generate efficiency-gain functions that show this trade-off.