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Relaxing the Hard Capacity Constraint

In: Peak Load and Capacity Pricing

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  • Chris Harris

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.

Suggested Citation

  • Chris Harris, 2015. "Relaxing the Hard Capacity Constraint," Palgrave Macmillan Books, in: Peak Load and Capacity Pricing, chapter 4, pages 123-140, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-37092-1_4
    DOI: 10.1057/9781137370921_4
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