A Cost Function for the Natural Gas Transmission Industry: Further Considerations

Olivier Massol

The Engineering Economist, 2011, vol. 56, issue 2, 95-122

Abstract: This article studies the cost function for the natural gas transmission industry. In addition to a tribute to H.B. Chenery, it firstly offers some further comments on a recent contribution (Yépez 2008): a statistical characterization of long-run scale economies and a simple reformulation of the long-run problem. An extension is then proposed to analyze how the presence of seasonally varying flows modifies the optimal design of a transmission infrastructure. Lastly, the case of a firm that anticipates a possible random rise in its future output is also studied to discuss the optimal degree of excess capacity to be built into a new transmission infrastructure.

Date: 2011
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Citations: View citations in EconPapers (13)

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Working Paper: A cost function for the natural gas transmission industry: further considerations (2011)
Working Paper: A cost function for the natural gas transmission industry: further considerations (2009)
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DOI: 10.1080/0013791X.2011.573615

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