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.
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The authors thank Prof. Guido Voigt, the Editor-in-Chief of OR Spectrum, and three anonymous referees for valuable comments and constructive suggestions that helped us to significantly improve the manuscript.
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Khoveyni, M., Eslami, R. Merging two-stage series network structures: A DEA-based approach. OR Spectrum 44, 273–302 (2022). https://doi.org/10.1007/s00291-021-00653-w
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DOI: https://doi.org/10.1007/s00291-021-00653-w