Using data envelopment analysis for costing bank products

An important problem that many banks face is to provide satisfactory cost estimates for the variety of products and services they offer. Accurate product cost estimates can be used to support better product mix and pricing decisions. In this paper we present a method for providing efficient and reliable cost estimates of bank products at the branch level, based on the non-parametric benchmarking technique of Data Envelopment Analysis (DEA). Results from an empirical study undertaken in a banking environment to demonstrate the applicability of the method are also presented.

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