Pitfalls of decomposition weights in the additive multi-stage DEA model

Abstract

This paper examines limitations of the multi-stage DEA (data envelopment analysis) model in the literature. We focus on the DEA model with additive efficiency decomposition. We create taxonomy for the multi-stage DEA models and show when the decomposition weights can be non-increasing. When the decomposition weight for a stage is deemed reflective of the stage׳s relative importance, this property then implies that upstream stages (regardless the stage efficiency scores) in the model will obtain higher priority in efficiency decomposition. We also find that the non-increasing weights can affect the evaluation of overall and stage efficiency scores. We illustrate our findings through an empirical data set.