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

Giovanni Cesaroni, Kristiaan Kerstens and Ignace van de Woestyne ()
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Ignace van de Woestyne: Department of Economics - Hogeschool-Universiteit Brussel

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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: 2019-05-16
Note: View the original document on HAL open archive server: https://hal.science/hal-02108470
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Citations: View citations in EconPapers (21)

Published in European Journal of Operational Research, 2019, 275 (1), pp.387-397. ⟨10.1016/j.ejor.2018.11.023⟩

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Related works:
Journal Article: Short- and long-run plant capacity notions: Definitions and comparison (2019)
Working Paper: Short- and Long-run Plant Capacity Notions: Definitions and Comparison (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02108470

DOI: 10.1016/j.ejor.2018.11.023

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