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Bi‐level Programing Merger Evaluation and Application to Banking Operations
Author(s) -
Wu Desheng Dash,
Luo Cuicui,
Wang Haofei,
Birge John R.
Publication year - 2016
Publication title -
production and operations management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.279
H-Index - 110
eISSN - 1937-5956
pISSN - 1059-1478
DOI - 10.1111/poms.12205
Subject(s) - incentive , supply chain , consolidation (business) , profit (economics) , industrial organization , computer science , business , operational efficiency , upstream (networking) , process management , operations research , operations management , microeconomics , finance , marketing , economics , computer network , engineering
The potential for operational efficiency improvement is a key consideration for firms contemplating the consolidation of both internal and external business units. This paper develops a leader–follower game model to assess such potential gains from the merger of different organizations with constrained resources. A profit‐sharing strategy and algorithm are proposed to solve the model while maintaining incentive compatibility within each unit's decision‐making process. This paper further demonstrates that in a framework, within the data envelopment analysis paradigm, a supply chain with an upstream leader and downstream followers is efficient if and only if both the leader and the followers are individually efficient. A case study of a banking operations merger shows how incentive compatible merger of operations can produce overall efficiency improvement.