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A note on input congestion

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  • Rødseth, Kenneth Løvold

Abstract

The notion of effective space is introduced, and input congestion is explained by economic activities’ exhaustion of effective space. In this setting, I show that profit maximization is inconsistent with input congestion at the firm level, but not necessarily with input congestion at the industry level, when effective space is shared among producers.

Suggested Citation

  • Rødseth, Kenneth Løvold, 2013. "A note on input congestion," Economics Letters, Elsevier, vol. 120(3), pages 599-602.
  • Handle: RePEc:eee:ecolet:v:120:y:2013:i:3:p:599-602
    DOI: 10.1016/j.econlet.2013.06.021
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    References listed on IDEAS

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    1. Murty, Sushama & Russell, R. Robert, 2010. "On modeling pollution-generating technologies," The Warwick Economics Research Paper Series (TWERPS) 931, University of Warwick, Department of Economics.
    2. Cherchye, Laurens & Kuosmanen, Timo & Post, Thierry, 2001. "Alternative treatments of congestion in DEA: A rejoinder to Cooper, Gu, and Li," European Journal of Operational Research, Elsevier, vol. 132(1), pages 75-80, July.
    3. Natalia Kuosmanen & Timo Kuosmanen & Timo Sipiläinen, 2013. "Consistent Aggregation of Generalized Sustainable Values from the Firm Level to Sectoral, Regional or Industry Levels," Sustainability, MDPI, Open Access Journal, vol. 5(4), pages 1-9, April.
    4. Chambers,Robert G., 1988. "Applied Production Analysis," Cambridge Books, Cambridge University Press, number 9780521314275, April.
    5. Fare, Rolf & Zelenyuk, Valentin, 2003. "On aggregate Farrell efficiencies," European Journal of Operational Research, Elsevier, vol. 146(3), pages 615-620, May.
    6. W. Briec & K. Kerstens, 2006. "S-Disposability assumption and duality between technology and cost function," Post-Print hal-00256871, HAL.
    7. Kuosmanen, Timo & Kortelainen, Mika & Sipiläinen, Timo & Cherchye, Laurens, 2010. "Firm and industry level profit efficiency analysis using absolute and uniform shadow prices," European Journal of Operational Research, Elsevier, vol. 202(2), pages 584-594, April.
    8. Murty, Sushama & Robert Russell, R. & Levkoff, Steven B., 2012. "On modeling pollution-generating technologies," Journal of Environmental Economics and Management, Elsevier, vol. 64(1), pages 117-135.
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    More about this item

    Keywords

    Congestion; Firm and industry technologies; Externalities;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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