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On the Measurement of Capacity Utilization

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  • Nelson, Randy A

Abstract

Capacity utilization is usually defined as the ratio of actual output to the output corresponding to (1) the minimum point on the short-run average total cost curve, and (2) the point of tangency between the long-run average total cost and short-run average total cost curves. In practice, however, capacity utilization is often measured as the ratio of actual to the maximum potential output consistent with a given capital stock. This paper demonstrates how to estimate the theoretical measures of capacity utilization, and examines the correlation between three measures of capacity utilization, and the McGraw-Hill estimates of capacity utilization, using data from a sample of U.S. privately-owned electric utilities for 1961-83. Copyright 1989 by Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

Volume (Year): 37 (1989)
Issue (Month): 3 (March)
Pages: 273-86

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Handle: RePEc:bla:jindec:v:37:y:1989:i:3:p:273-86

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821

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Cited by:
  1. Prior, Diego, 2003. "Long- and short-run non-parametric cost frontier efficiency: An application to Spanish savings banks," Journal of Banking & Finance, Elsevier, vol. 27(4), pages 655-671, April.
  2. Roberto Fazioli & Massimo Filippini, 1997. "Cost Structure and Product Mix of Local Public Theatres," Journal of Cultural Economics, Springer, vol. 21(1), pages 77-86, March.
  3. Subhash C. Ray & Kankana Mukherjee & Yanna Wu, 2006. "Direct And Indirect Measures Of Capacity Utilization: A Non-Parametric Analysis Of Us Manufacturing," Manchester School, University of Manchester, vol. 74(4), pages 526-548, 07.
  4. Briec, Walter & Kerstens, Kristiaan & Prior, Diego & Van de Woestyne, Ignace, 2010. "Tangency capacity notions based upon the profit and cost functions: A non-parametric approach and a general comparison," Economic Modelling, Elsevier, vol. 27(5), pages 1156-1166, September.
  5. Wu, Wei-Ming, 2009. "An approach for measuring the optimal fleet capacity: Evidence from the container shipping lines in Taiwan," International Journal of Production Economics, Elsevier, vol. 122(1), pages 118-126, November.
  6. Sarba Priya Ray, 2011. "Economic Efficiency in Indian Rubber Industry," Contemporary Economics, University of Finance and Management in Warsaw, vol. 5(4), December.
  7. James Kirkley & Catherine Morrison Paul & Dale Squires, 2002. "Capacity and Capacity Utilization in Common-pool Resource Industries," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(1), pages 71-97, June.
  8. Itziar Lazkano, 2008. "Cost Structure and Capacity Utilisation in Multi-product Industries: An Application to the Basque Trawl Industry," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 41(2), pages 189-207, October.
  9. Walter Briec & Kristiaan Kerstens & Diego Prior, 2009. "Tangency Capacity Notions Based upon the Pro?t and Cost Functions: A Non-Parametric Approach and a Comparison," Working Papers 2009-ECO-05, IESEG School of Management.
  10. Van de Woestyne, Ignace & Kerstens, Kristiaan & Prior, Diego & De Borger, Bruno, 2009. "Static Efficiency Decompositions and Capacity Utilisation: Integrating Economic and Technical Capacity Notions," Working Papers 2009/30, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  11. Pascoe, Sean & Tingley, Diana, 2006. "Economic capacity estimation in fisheries: A non-parametric ray approach," Resource and Energy Economics, Elsevier, vol. 28(2), pages 124-138, May.
  12. Escobari, Diego & Lee, Jim, 2013. "Demand Uncertainty and Capacity Utilization in Airlines," MPRA Paper 46059, University Library of Munich, Germany.
  13. H. Kim, 1999. "Economic Capacity Utilization and its Determinants: Theory and Evidence," Review of Industrial Organization, Springer, vol. 15(4), pages 321-339, December.
  14. Sahoo, Biresh K. & Tone, Kaoru, 2009. "Decomposing capacity utilization in data envelopment analysis: An application to banks in India," European Journal of Operational Research, Elsevier, vol. 195(2), pages 575-594, June.
  15. Kalyuzhnova, Yelena & Vagliasindi, Maria, 2006. "Capacity utilization of the Kazakhstani firms and the Russian financial crisis: A panel data analysis," Economic Systems, Elsevier, vol. 30(3), pages 231-248, October.
  16. Squires, Dale & Jeon, Yongil & Grafton, R. Quentin & Kirkley, James, 2010. "Controlling excess capacity in common-pool resource industries: the transition from input to output controls," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(3), September.
  17. Kaustuva Barik, 2005. "Capacity Utilization in Indian Paper Industry," Microeconomics 0503001, EconWPA.
  18. Dupont, Diane P. & Grafton, R. Quentin & Kirkley, James & Squires, Dale, 2002. "Capacity utilization measures and excess capacity in multi-product privatized fisheries," Resource and Energy Economics, Elsevier, vol. 24(3), pages 193-210, June.
  19. Gary Ferrier & Hervé Leleu & Vivian Valdmanis, 2009. "Hospital capacity in large urban areas: is there enough in times of need?," Journal of Productivity Analysis, Springer, vol. 32(2), pages 103-117, October.
  20. Marini, Giovanni & Pannone, Andrea, 2007. "Capital and capacity utilization revisited: A theory for ICT-assisted production systems," Structural Change and Economic Dynamics, Elsevier, vol. 18(2), pages 231-248, June.
  21. E. Abdul Azeez, 2002. "Economic reforms and industrial performance: An analysis of capacity utilisation in Indian manufacturing," Centre for Development Studies, Trivendrum Working Papers 334, Centre for Development Studies, Trivendrum, India.

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