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Plant capacity notions: review, new definitions, and existence results at firm and industry levels

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  • Kristiaan Kerstens

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Jafar Sadeghi

    (Ivey Business School)

Abstract

This study investigates the existence of solutions for the key plant capacity utilisation (PCU) concepts using general nonparametric technologies. This is done via a theoretical review of existing and some new PCU concepts. Focusing on short-run and long-run output-oriented, attainable output-oriented, and input-oriented PCU notions, we first investigate the existence of solutions at the firm level. Under mild axioms, this question regarding the existence of solutions for these PCU concepts at the firm level is affirmatively answered under variable and constant returns to scale as well as under convex and nonconvex assumptions. However, short-run and long-run output-oriented and attainable output-oriented PCU concepts may not be implementable depending on certain conditions. There are no such reservations for the input-oriented PCU. Then, for this same range of PCU concepts, we explore the more difficult question as to the existence of solutions at the industry level. The output-oriented and attainable output-oriented PCU exist at the industry level under strict conditions: existence and attainability are interwoven at this level. The industry input-oriented PCU is always feasible at the industry model. This theoretical review is supplemented by a semi-systematic empirical review, and an empirical application. We conclude that input-oriented PCU is clearly the best concept.

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  • Kristiaan Kerstens & Jafar Sadeghi, 2023. "Plant capacity notions: review, new definitions, and existence results at firm and industry levels," Post-Print hal-04272630, HAL.
    • Handle: RePEc:hal:journl:hal-04272630
    DOI: 10.1080/00207543.2023.2239376
    Note: View the original document on HAL open archive server: https://hal.science/hal-04272630
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    1. Kristiaan Kerstens & Jafar Sadeghi & Ignace Woestyne & John Walden, 2024. "Short-run Johansen frontier-based industry models: methodological refinements and empirical illustration on fisheries," Journal of Productivity Analysis, Springer, vol. 61(1), pages 47-62, February.

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    Keywords

    data envelopment analysis; nonparametric technology; capacity utilisation;
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