Data Envelopment Analysis is an analytical tool for evaluating the relative technical efficiency of a set of organizations with the same multiple inputs and outputs. This paper examines the correct interpretation of inefficiency scores in the Additive model of Data Envelopment Analysis. A contrived numerical example is offered to demonstrate that certain computational statements appearing in recent literature are not entirely correct. As rectification, a region of stability is defined that identifies sufficient conditions for altering a technical inefficiency classification to that of technical efficiency. Finally, this region of stability technique is applied to bank branch operating efficiencies to demonstrate managerial interpretations and policy implications.
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Haag et al. (1995) studied this question.
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