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* Catherine Cazals†, Paul Dudley‡, Jean-Pierre Florens§ and Michael Jones¶ 17 18 19 20 1 INTRODUCTION The analysis of efficiency is of great interest for policy decision makers, particularly for businesses and regulators. Many methods may be applied to estimate inefficiencies of production units. These methods include deterministic or stochastic methods and parametric or non-parametric methods, applied on cross-sectional or panel data. However the most often used in the applied literature is the parametric stochastic frontier analysis (SFA), for which a particular form for the studied efficiency frontier (production or cost) is specified and some particular distribution for inefficiencies is assumed. Different specifications and assumptions may be more appropriate in some applications than others, and this may depend on the structure of the dataset and the policy questions involved for the sector in question. The present chapter examines these questions concerning the appropriate SFA method and specification to apply to delivery office data in the postal sector. The delivery offices in the postal sector are particularly suited to frontier and efficiency estimation. First, there are numerous operational offices, each fulfilling a similar purpose and function, and thereby providing a sizeable dataset for comparison. Second, the operational office functions, particularly in delivery, are highly labor intensive, thereby creating scope for the practice and efficiency of one office to differ from that of another. In previous research within the postal sector, the SFA has been applied to a single year of data in cross-sectional analysis of delivery offices and mail centers (Horncastle et...