Merging decision-making units under inter-temporal dependence

This article deals with merging of decision-making units (DMUs) under the inter-temporal dependence assumption. The present study answers the following question in the dynamic data envelopment analysis framework: if a subset of DMUs is required to merge and create a new DMU with a specific input/output level and a predetermined efficiency target, what should be the level of output/input of the merged DMU? Sufficient conditions are derived for input/outputestimation of the merged DMU under the inter-temporal dependence assumption. The performance of the proposed method is demonstrated by applying it to a banking sector example.