An OLS regression describes the average relationship between inputs and output. But in many economic questions the average is not what we are interested in. If two firms use the same amount of capital and labour, but one produces twice as much as the other, we would like to know how far each of them is away from what is technically possible – and not from what is usual. Stochastic frontier models, which were proposed independently by Aigner, Lovell and Schmidt (1977) and Meeusen and van den Broeck (1977), are designed for exactly that question. This post introduces the basic idea behind them and shows how to estimate such models in R.