IDEAS home Printed from https://ideas.repec.org/h/spr/lnechp/978-3-319-33398-4_3.html
   My bibliography  Save this book chapter

Characterizations of Long-Run Producer Optimum

In: The Short-Run Approach to Long-Run Equilibrium in Competitive Markets

Author

Listed:
  • Anthony Horsley
  • Andrew J. Wrobel

Abstract

This gives characterizations of long-run producer optimum for a general convex technology. Each is either an optimization system or a differential system (i.e., a set of conditions put in terms of either the marginal optimal values or the optimal solutions to a primal-dual pair of programmes). One system is singled out because of its importance to applications. It is the Split SRP Optimization System, which serves as the preferred basis for the short-run approach because the technology of electricity generation is best described by production sets, and because short-run cost (SRC) minimization for each separate plant is easily split off as a subprogramme of short-run profit (SRP) maximization. The first differential system presented is the SRC/P Partial Differential System, which generalizes Boiteux’s original set of conditions. The L/SRC Partial Differential System has the same mathematical form but uses the LRC instead of the SRP. Equivalence of the two systems extends, to nondifferentiable costs, the Wong-Viner Envelope Theorem on equality of SRMC and LRMC. This is made possible by using the subdifferential as a generalized, multi-valued derivative, and by replacing input optimality with the stronger condition that the rental prices be equal to the profit-imputed values of the fixed inputs. The values must be based on increments to the operating profit (it is ineffective to try to value capacity increments by reductions in a nondifferentiable operating cost).

Suggested Citation

  • Anthony Horsley & Andrew J. Wrobel, 2016. "Characterizations of Long-Run Producer Optimum," Lecture Notes in Economics and Mathematical Systems, in: The Short-Run Approach to Long-Run Equilibrium in Competitive Markets, chapter 0, pages 21-71, Springer.
  • Handle: RePEc:spr:lnechp:978-3-319-33398-4_3
    DOI: 10.1007/978-3-319-33398-4_3
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:lnechp:978-3-319-33398-4_3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.