Either thermostat could be bad or it could be a broken dip tube.
Let it warm up until the top stat is satisfied and see if it switches to the bottom stat. Then be sure the bottom stat passes the power to the lower element. If the lower element satisfies the stat and you still run out of hot water too fast suspect the broken dip tube. That will allow the incoming cold water to short circuit the heater and go right out the top. Normally the cold water gets introduced into the bottom and tends to stay there.
