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: KU Leuven, Belgium

No 2017-EQM-04, Working Papers from IESEG School of Management

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 (see Lovell and Pastor (1999)): 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 utilization

Keywords: efficiency; plant capacity utilisation (search for similar items in EconPapers)
Pages: 28 pages
Date: 2017-06
New Economics Papers: this item is included in nep-eff
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Citations: View citations in EconPapers (1)

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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 (2019)
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