Non-cooperative two-stage inverse DEA: a Stackelberg games approach for the efficiency analysis of China’s regional economic development and people’s living standards

Abstract

This paper proposes a two-stage inverse DEA model combined with Stackelberg’s game theory for the efficiency measurement of China’s regional economic development and people’s living standards. The first stage is considered as the leader since it provides the capital and the infrastructure of the second stage. We give the required inputs of both leader and follower for producing more output levels by different percentages. We have found that in both stages, extra input resources are redundant for many areas when a higher level of output is required, which indicates the potential of improvement. Decision makers can assign specific tasks to each province according to their improvement potential. At the same time, we found that some ineffective areas may perform better and produce more output without new input introduced.