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Multi-period efficiency and Malmquist productivity index in two-stage production systems

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  • Kao, Chiang
  • Hwang, Shiuh-Nan
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    Abstract

    Conventional two-stage data envelopment analysis (DEA) models measure the overall performance of a production system composed of two stages (processes) in a specified period of time, where variations in different periods are ignored. This paper takes the operations of individual periods into account to develop a multi-period two-stage DEA model, which is able to measure the overall and period efficiencies at the same time, with the former expressed as a weighted average of the latter. Since the efficiency of a two-stage system in a period is the product of the two process efficiencies, the overall efficiency of a decision making unit (DMU) in the specified period of time can be decomposed into the process efficiency of each period. Based on this decomposition, the sources of inefficiency in a DMU can be identified. The efficiencies measured from the model can also be used to calculate a common-weight global Malmquist productivity index (MPI) between two periods, in that the overall MPI is the product of the two process MPIs. The non-life insurance industry in Taiwan is used to verify the proposed model, and to explain why some companies performed unsatisfactorily in the specified period of time.

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    Bibliographic Info

    Article provided by Elsevier in its journal European Journal of Operational Research.

    Volume (Year): 232 (2014)
    Issue (Month): 3 ()
    Pages: 512-521

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    Handle: RePEc:eee:ejores:v:232:y:2014:i:3:p:512-521

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    Web page: http://www.elsevier.com/locate/eor

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    Keywords: Data envelopment analysis; Malmquist productivity index; Efficiency; Two-stage system; Parallel system;

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    Cited by:
    1. Sahoo, Biresh K. & Zhu, Joe & Tone, Kaoru & Klemen, Bernhard M., 2014. "Decomposing technical efficiency and scale elasticity in two-stage network DEA," European Journal of Operational Research, Elsevier, vol. 233(3), pages 584-594.

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