Merging two-stage series network structures: A DEA-based approach

Mohammad Khoveyni () and Robabeh Eslami
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Mohammad Khoveyni: Islamic Azad University
Robabeh Eslami: South Tehran Branch, Islamic Azad University

OR Spectrum: Quantitative Approaches in Management, 2022, vol. 44, issue 1, No 10, 273-302

Abstract: Abstract Merging decision-making units (DMUs) is one of the most important issues in data envelopment analysis (DEA). Hitherto, several merging approaches have been presented in DEA; however, none of them can be used in network DEA. Because they do not consider intermediate products of two-stage DMUs (or two-stage processes) in the merging process. To tackle this problem, this study contributes to network DEA by introducing a novel merging approach. In this approach, we first survey the situations of the first and second stages of the candidate two-stage DMUs relative to the efficient frontiers and then obtain the merged two-stage DMU based on these situations. In other words, our proposed approach estimates the appropriate inputs and intermediate products for merging the candidate two-stage DMUs so that the merged two-stage DMU gets its favorable efficiency score. This research also explains the managerial and economic implications of merging two-stage DMUs. Finally, a numerical example and an empirical application to the US commercial banks are provided to show the use of the proposed approach.

Keywords: Data envelopment analysis (DEA); Network DEA (NDEA); Production possibility set (PPS); Merger analysis; Efficiency (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s00291-021-00653-w

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