General Two-Stage Systems
The basic two-stage system discussed in the preceding chapter describes a production type where all intermediate products produced by the first division are consumed by the second division for production. Specifically, no intermediate products flow out of the system, and the second division does not consume other inputs supplied from outside, except for the intermediate products. However, it should be noted that real world cases are usually more complicated than this basic two-stage system. For example, some intermediate products may flow out of the system to be sold as spare parts, and the second division may need workers to work on the intermediate products to become the final products. Taking these situations into account, we then have a general two-stage system, which allows the first division to have final outputs and the second division to have exogenous inputs. Several models have been proposed for measuring the efficiency of this type of system, and many applications have been reported in the literature (Kao 2014a).
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