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

Giovanni Cesaroni, Kristiaan Kerstens () and Ignace Van de Woestyne

European Journal of Operational Research, 2019, vol. 275, issue 1, 387-397

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.

Keywords: Data Envelopment Analysis; Efficiency; Plant capacity utilisation (search for similar items in EconPapers)
Date: 2019
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Working Paper: Short- and long-run plant capacity notions: Definitions and comparison (2019)
Working Paper: Short- and Long-run Plant Capacity Notions: Definitions and Comparison (2017) Downloads
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DOI: 10.1016/j.ejor.2018.11.023

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