A factor which can assume only a predefined set of discrete values. Categorical variables are frequently used to indicate the presence or absence of an attribute. An analysis on fast-food restaurants could use a categorical variable assigned to I to indicate the presence of a drive-in window, with the value O denoting its absence. The use of categorical variables requires modifications in DEA models as indicated in Banker and Morey (1986). See also: ordinal variable.
– Banker R D and Morey R (1986) ‘The use of categorical variables in data envelopment analysis’, Mgmt. Sci., 32, pp 1613-1627.