Optimizing Productivity Through Merger of Decision-Making Units Using DEA

Hitherto, many studies have focused on merging decision-making units (DMUs) using data envelopment analysis (DEA). However, to the best of our knowledge, none of these studies has aimed to merge candidate DMUs to create the most productive scale size (MPSS)-merged DMU. Hence, this study proposes a DEA-based approach for merging candidate DMUs such that the merged DMU would be MPSS. The MPSS-merged DMU has three outstanding features as follows: (1) it has the highest level of productivity in the production technology, (2) it saves more resources compared to the original DMUs, and (3) it can be considered as a benchmark for other DMUs to improve their performance, reduce their costs, and increase their profits and revenues. Thus, creating the MPSS-merged DMU is of significant importance from managerial and economic viewpoints, as explained in this study. Finally, two numerical and empirical examples are provided to illustrate the geometric interpretation and applicability of the proposed approach, respectively.