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Serial Chain Merger Evaluation Model and Application to Mortgage Banking *
Author(s) -
Wu Desheng Dash,
Birge John R.
Publication year - 2012
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.2011.00340.x
Subject(s) - supply chain , upstream (networking) , data envelopment analysis , downstream (manufacturing) , industrial organization , computer science , chain (unit) , business , marketing , telecommunications , mathematics , mathematical optimization , astronomy , physics
Mortgage banking operations can be viewed from a supply chain perspective, where the primary and secondary markets are upstream and downstream chain members, respectively. This article describes a serial‐chain‐merger data envelopment analysis (DEA) model to assess potential gains from the merger of different chain operations. We show that in our framework the merger of different chains with many sub‐chains is efficient within the DEA paradigm if and only if the mergers of sub‐chain members are all efficient. A case study of a banking operations merger is conducted to illustrate and validate the proposed approach. The computations show that merger of operations can result in overall efficiency improvement in the banking industry if the merger preserves the features assumed in the DEA model.