Shared Resources and Efficiency Decomposition in Two-Stage Networks
In many real world scenarios, decision making units (DMUs) may have a two-stage structure with input resources shared by both stages of operations. The distinguishing characteristic is that some of the inputs to the first stage are also consumed by the second stage, and some of the shared inputs cannot be conveniently split up and allocated to operations of the two stages. Recognizing this distinction is critical for these types of DEA applications because measuring the efficiency of the production for first-stage outputs can be misleading and understate the efficiency if DEA fails to consider that some of the inputs generate other second-stage outputs. This chapter presents DEA models for measuring the performance of two-stage network processes with non-splittable shared inputs.