Relaxing the Hard Capacity Constraint

Chris Harris

Chapter 4 in Peak Load and Capacity Pricing, 2015, pp 123-140 from Palgrave Macmillan

Abstract: Abstract Most authors in the canon have simplified plant costs by assuming a single variable cost up to a hard capacity limit at which variable costs become infinite. The cost of capacity then tends to have constant returns to scale. If we have decreasing returns to scale in operation, then the concept of capacity becomes harder to define. Since decreasing returns to scale in operation is a reality, we must attend to this.

Keywords: Demand Function; Variable Cost; Peak Load; Karush Kuhn Tucker; Technology Frontier (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-37092-1_4

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DOI: 10.1057/9781137370921_4

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