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Abstract

This article studies the cost function for the natural gas transmission industry. In addition to a tribute to H.B. Chenery, it firstly offers some further comments on a recent contribution (Yépez, 2008): a statistical characterization of long-run scale economies, and a simple reformulation of the long-run problem. An extension is then proposed to analyze how the presence of seasonally-varying flows modifies the optimal design of a transmission infrastructure. Lastly, the case of a firm that anticipates a possible random rise in its future output is also studied to discuss the optimal degree of excess capacity to be built into a new transmission infrastructure.

Publication Type:	Monograph (Discussion Paper)
Additional Information:	© 2011 Olivier Massol.
Publisher Keywords:	Engineering economics, natural gas transmission, infrastructure planning
Subjects:	H Social Sciences > HB Economic Theory
Departments:	School of Policy & Global Affairs > Economics > Discussion Paper Series

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