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A cost function for the natural gas transmission industry: further considerations

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  • Massol, O.

Abstract

This article studies the cost function for the natural gas transmission industry. In addition to a tribute to H.B. Chenery, it firstly offers some further comments on a recent contribution (Yépez, 2008): a statistical characterization of long-run scale economies, and a simple reformulation of the long-run problem. An extension is then proposed to analyze how the presence of seasonally-varying flows modifies the optimal design of a transmission infrastructure. Lastly, the case of a firm that anticipates a possible random rise in its future output is also studied to discuss the optimal degree of excess capacity to be built into a new transmission infrastructure.

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File URL: http://openaccess.city.ac.uk/1464/1/A_cost_function_for_the_natural_gas_transmission_industry.pdf
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Bibliographic Info

Paper provided by Department of Economics, City University London in its series Working Papers with number 11/03.

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Date of creation: 2011
Date of revision:
Handle: RePEc:cty:dpaper:11/03

Contact details of provider:
Postal: Department of Economics, Social Sciences Building, City University London, Whiskin Street, London, EC1R 0JD, United Kingdom,
Phone: +44 (0)20 7040 8500
Web page: http://www.city.ac.uk
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Related research

Keywords: Engineering economics; natural gas transmission; infrastructure planning;

References

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  1. Andre, Jean & Bonnans, Frédéric & Cornibert, Laurent, 2009. "Optimization of capacity expansion planning for gas transportation networks," European Journal of Operational Research, Elsevier, vol. 197(3), pages 1019-1027, September.
  2. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
  3. Kabirian, Alireza & Hemmati, Mohammad Reza, 2007. "A strategic planning model for natural gas transmission networks," Energy Policy, Elsevier, vol. 35(11), pages 5656-5670, November.
  4. Griffin, James M, 1978. "Joint Production Technology: The Case of Petrochemicals," Econometrica, Econometric Society, vol. 46(2), pages 379-96, March.
  5. Griffin, James M, 1979. "Statistical Cost Analysis Revisited," The Quarterly Journal of Economics, MIT Press, vol. 93(1), pages 107-29, February.
  6. Axel Pierru, 2007. "Short-run and long-run marginal costs of joint products in linear programming," Recherches économiques de Louvain, De Boeck Université, vol. 73(2), pages 153-171.
  7. Daniel De Wolf & Yves Smeers, 2000. "The Gas Transmission Problem Solved by an Extension of the Simplex Algorithm," Management Science, INFORMS, vol. 46(11), pages 1454-1465, November.
  8. James M. Griffin, 1977. "Long-Run Production Modeling with Pseudo Data: Electric Power Generation," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 112-127, Spring.
  9. Callen, Jeffrey L, 1978. "Production, Efficiency, and Welfare in the Natural Gas Transmission Industry," American Economic Review, American Economic Association, vol. 68(3), pages 311-23, June.
  10. Axel PIERRU, 2007. "Short-run and long-run marginal costs of joint products in linear programming," Discussion Papers (REL - Recherches Economiques de Louvain) 2007022, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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Cited by:
  1. Massol, O. & Tchung-Ming, S., 2012. "Joining the CCS Club! Insights from a Northwest European CO2 Pipeline Project," Working Papers 12/10, Department of Economics, City University London.

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