Cost function for the natural gas transmission industry: further considerations
AbstractThis article studies the cost function for the natural gas transmission industry. 60 years ago, Hollis B. Chenery published an important contribution that demonstrated how, in that particular industry, the production function of microeconomic theory can be rewritten with engineering variables (Chenery, 1949). In 2008, an article published in The Engineering Economist (Yépez, 2008) provided a refreshing revival on Chenery's seminal thoughts. In addition to a tribute to the late H.B. Chenery, this document offers some further comments and extensions on Yépez (2008). It provides a statistically estimated characterisation of the long-run scale economies and a discussion on the short-run economics of the duplication of existing equipments. As a first extension, we study the optimal design for infrastructure that is planned to transport a seasonally-varying flow of natural gas. The second extension analyzes the optimal degree of excess capacity to be built into a new infrastructure by a firm that expects a random rise in its output during the infrastructure's lifetime.
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Bibliographic InfoPaper provided by CREDEN (Centre de Recherche en Economie et Droit de l'Energie), Faculty of Economics, University of Montpellier 1 in its series Cahiers du CREDEN (CREDEN Working Papers) with number 09.09.86.
Length: 28 pages
Date of creation: 2009
Date of revision:
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Postal: Université de Montpellier 1, Faculté des Sciences Economiques, CREDEN, Rue Raymond Dugrand - Espace Richter, CS 79606, 34960 Montpellier Cedex 2, France
Phone: 33 (0)4 67 15 83 60
Fax: 33 (0)4 67 15 84 04
Web page: http://www.creden.univ-montp1.fr
More information through EDIRC
natural gas transmission industry; cost function; optimal design for infrastructure;
Other versions of this item:
- Massol, O., 2011. "A cost function for the natural gas transmission industry: further considerations," Working Papers 11/03, Department of Economics, City University London.
- NEP-ALL-2009-12-11 (All new papers)
- NEP-ENE-2009-12-11 (Energy Economics)
- NEP-ENV-2009-12-11 (Environmental Economics)
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