The capital supply curve in capacity expansion models: Some economic and algorithmic aspects

S. Sen, S. K. Saraf, A. L. Soyster and F. H. Murphy

Naval Research Logistics Quarterly, 1984, vol. 31, issue 2, 199-212

Abstract: Capacity expansion models typically minimize the discounted cost of acquisition and operation over a given planning horizon. In this article we generalize this idea to one in which a capital supply curve replaces the usual discount rate. A capital supply curve is a means to model financial outlook, investment limits, and risk. We show that when such a curve is included in a capacity expansion model, it will, under certain conditions, provide a less capital intensive solution than one which incorporates a discount rate. In this article, we also provide an algorithm that solves capacity expansion models that incorporate a capital supply curve. The attractive feature of this algorithm is that it provides a means to utilize the “discount rate” models efficiently. Throughout, we give applications in power generation planning and computational experience for this application is also presented.

Date: 1984
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https://doi.org/10.1002/nav.3800310204

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Persistent link: https://EconPapers.repec.org/RePEc:wly:navlog:v:31:y:1984:i:2:p:199-212

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