Two-Stage DEA: An Application to Major League Baseball
01 Apr 2003-Journal of Productivity Analysis (Kluwer Academic Publishers)-Vol. 19, Iss: 2, pp 227-249
TL;DR: In this article, the authors use DEA to model DMUs that produce in two stages, with output from the first stage becoming input to the second stage, and apply the model to Major League Baseball, demonstrating its advantages over a standard DEA model.
Abstract: We show how to use DEA to model DMUs that produce in two stages, with output from the first stage becoming input to the second stage. Our model allows for any orientation or scale assumption. We apply the model to Major League Baseball, demonstrating its advantages over a standard DEA model. Our model detects inefficiencies that standard DEA models miss, and it can allow for resource consumption that the standard DEA model counts towards inefficiency. Additionally, our model distinguishes inefficiency in the first stage from that in the second stage, allowing managers to target inefficient stages of the production process.
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Additional excerpts
...Modeling such network structures has been critically debated (Cook, Zhu, Bi, & Yang, 2010; Färe & Grosskopf, 1996; Golany, Hackman, & Passy, 2006; Chiang Kao, 2009; C. Kao, 2009; Chiang Kao, 2014; Lewis & Sexton, 2004; Paradi et al., 2011; Sexton & Lewis, 2003; Kaoru Tone & Tsutsui, 2010)....
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TL;DR: It is demonstrated that the duality in the standard DEA naturally migrates to the two-stage network DEA, and formulas are developed to obtain frontier projections and divisional efficiency scores using a DEA model's and its dual solutions.
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TL;DR: The results show that the model performs better in measuring efficiency, and is able to discriminate the causes of inefficiency, thus helping business management to be more effective through providing more guidance to business performance improvement.
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TL;DR: An additive DEA approach is built to evaluate the efficiency of the proposed new two-stage network structures, and propose a better efficiency decomposition to the individual system to analyze the industrial production in 30 provincial level regions in mainland China.
Abstract: The rapid development in economy of China has intensified the country's many problems, such as environmental pollution and energy shortage. Thus, establishing a society with resource conservation and environmental harmony, typically reusing the pollution and waste from the industrial production, has attracted attention from both the government and the public in recent years. Data envelopment analysis (DEA) has been widely used in measuring two-stage network structures that constituted with homogenous decision making units. However, previous works failed to take the undesirable intermediate products into account in the two-stage network structures including production system and disposal system. In this study, we build an additive DEA approach to evaluate the efficiency of the proposed new two-stage network structures, and propose a better efficiency decomposition to the individual system. Finally, our approach is applied to analyze the industrial production in 30 provincial level regions in mainland China and some implications are given.
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References
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TL;DR: In this paper, a non-parametric productivity measure that explicitly incorporates intermediate products is proposed, which is based on the Productivity Index (PII) and employs a nonparametric approach to measure productivity.
462 citations
TL;DR: A nonparametric, linear programming, frontier procedure for obtaining a measure of managerial efficiency that controls for exogenous features of the operating environment is introduced.
Abstract: The ability of a production unit to transform inputs into outputs is influenced by its technical efficiency and external operating environment. This paper introduces a nonparametric, linear programming, frontier procedure for obtaining a measure of managerial efficiency that controls for exogenous features of the operating environment. The approach also provides statistical tests of the effects of external conditions on the efficient use of each individual input (for an input oriented model) or for each individual output (for an output oriented model). The procedure is illustrated for a sample of nursing homes.
441 citations
"Two-Stage DEA: An Application to Ma..." refers methods in this paper
...Sexton and Silkman (2000) and Fried et al. (1999) present similar but distinct approaches to dealing with site characteristics in standard DEA models....
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TL;DR: In this article, the authors introduce a frontier model for productivity measurement that explicitly recognizes that some inputs are produced and consumed within the production technology, where intermediate inputs may also be final output.
Abstract: The purpose of this paper is to introduce a frontier model for productivity measurement that explicitly recognizes that some inputs are produced and consumed within the production technology. Here we differ from Koopmans (1951) by assuming that the intermediate inputs may also be final output. This assumption is in line with current international trade theory, where intermediate inputs are tradable. Our model consists of two production units that are interconnected in a network to form a production technology. The productivity measure employed here is the so-called Malmquist productivity index. This index consists of ratios of distance functions. Here these distance functions are defined on the network technology and they are computed using linear programming techniques.
439 citations
TL;DR: It is found that the decomposition of production into subproduction processes reduces the dimensions of problem specification, with the effect that a larger number of variables may be usefully included in the model.
Abstract: Agricultural production is often characterised by multiple inputs and multiple outputs to multiple production processes. Where an output from one process is used as an input to another, this output is called an intermediate product. This is a common situation when a farm produces both crops and livestock. The analysis of production efficiency is important for the evaluation of agricultural policy, but until recently, no methods have explicitly included intermediate products. This study applies a non-parametric technique of efficiency measurement which includes intermediate products. The data set is a sample of dairy farms drawn using a complex survey design. The use of non-parametric efficiency measurement and the subsequent application of bootstrapping and kernel density estimation to the results allow inferences to be drawn concerning the whole population from which the sample was drawn. We find that the decomposition of production into subproduction processes reduces the dimensions of problem specification, with the effect that a larger number of variables may be usefully included in the model.
145 citations