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Short- and long-run plant capacity notions: Definitions and comparison

Author

Listed:
  • Giovanni Cesaroni
  • Kristiaan Kerstens

    () (Department of Economics - IESEG School of Managementg, LEM - Lille économie management - LEM - UMR 9221 - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Ignace van de Woestyne

    () (Department of Economics - Hogeschool-Universiteit Brussel)

Abstract

Starting from the existing input- and output-oriented plant capacity measures, this contribution proposes new long-run input- and output-oriented plant capacity measures. While the former leave fixed inputs unchanged, the latter allow for changes in all input dimensions to gauge either a maximal plant capacity output or a minimal input combination at which non-zero production starts. We also establish a formal relation between the existing short-run and the new long-run plant capacity measures. Furthermore, for a standard nonparametric frontier technology, all linear programs as well as their variations are specified to compute all efficiency measures defining these short- and long-run plant capacity concepts. Furthermore, it is shown how the new long run plant capacity measures are identical to existing models of a variable returns to scale technology without inputs or without outputs: thus, we offer an interesting production economic justification for these models. Finally, we numerically illustrate this basic relationship between these short-run and long-run technical concepts of capacity utilisation and provide an empirical application.

Suggested Citation

  • Giovanni Cesaroni & Kristiaan Kerstens & Ignace van de Woestyne, 2019. "Short- and long-run plant capacity notions: Definitions and comparison," Post-Print hal-02108470, HAL.
  • Handle: RePEc:hal:journl:hal-02108470
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-02108470
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    Cited by:

    1. Kerstens, Kristiaan & Sadeghi, Jafar & Van de Woestyne, Ignace, 2019. "Convex and nonconvex input-oriented technical and economic capacity measures: An empirical comparison," European Journal of Operational Research, Elsevier, vol. 276(2), pages 699-709.

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