Article | Management Science | December 2012

On the Efficiency-Fairness Trade-Off

by Dimitris Bertsimas, Vivek F. Farias and Nikolaos Trichakis

Abstract

This paper deals with a basic issue: How does one approach the problem of designing the "right" objective for a given resource allocation problem? The notion of what is right can be fairly nebulous; we consider two issues that we see as key: efficiency and fairness. We approach the problem of designing objectives that account for the natural tension between efficiency and fairness in the context of a framework that captures a number of resource allocation problems of interest to managers. More precisely, we consider a rich family of objectives that have been well studied in the literature for their fairness properties. We deal with the problem of selecting the appropriate objective from this family. We characterize the trade-off achieved between efficiency and fairness as one selects different objectives, and we develop several concrete managerial prescriptions for the selection problem based on this trade-off. Finally, we demonstrate the value of our framework in a case study that considers air traffic management.

Keywords: resource allocation; fairness; decision support; Cost vs Benefits; Fairness; Resource Allocation; Performance Efficiency; Air Transportation Industry;

Citation:

Bertsimas, Dimitris, Vivek F. Farias, and Nikolaos Trichakis. "On the Efficiency-Fairness Trade-Off." Management Science 58, no. 12 (December 2012): 2234–2250.