DEA Models for Two-Stage Network Processes

While the definition of a DMU is generic and DMUs can be in various forms such as hospitals, products, universities, cities, courts, business firms, and others, DMUs can have a two-stage structure in many cases. For example, banks Bank use labor and assets to generate deposits which are in turn used to generate load incomes. Seiford and Zhu (Management Science, 45(9), 1270–1288, 1999) use a two-stage process to measure the profitability and marketability of US commercial banks US commercial banks . In their study, profitability is measured using labor and assets as inputs, and the outputs are profits and revenue. In the second stage for marketability Marketability , the profits and revenue are then used as inputs, while market value Market value (MV) , returns and earnings per share Earnings per share (EPS) are used as outputs. Chilingerian and Sherman (Handbook on Data Envelopment Analysis, Chapter 17, 2004) describe another two-stage process in measuring physician care. Their first stage is a manager-controlled process with inputs including registered nurses, medical supplies, and capital and fixed costs. These inputs generate the outputs or intermediate measures Intermediate measures (inputs to the second stage), including patient days, quality of treatment, drug dispensed, among others. The outputs of the second (physician controlled) stage include research grants, quality of patients, and quantity of individuals trained, by specialty.