The Short-Run Approach to Long-Run Equilibrium in Competitive Markets

A General Theory with Application to Peak-Load Pricing with Storage

  • Anthony Horsley
  • Andrew J. Wrobel

Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 684)

Table of contents

  1. Front Matter
    Pages i-x
  2. Anthony Horsley, Andrew J. Wrobel
    Pages 1-13
  3. Anthony Horsley, Andrew J. Wrobel
    Pages 21-71
  4. Anthony Horsley, Andrew J. Wrobel
    Pages 73-89
  5. Anthony Horsley, Andrew J. Wrobel
    Pages 91-118
  6. Anthony Horsley, Andrew J. Wrobel
    Pages 119-135
  7. Anthony Horsley, Andrew J. Wrobel
    Pages 137-154
  8. Anthony Horsley, Andrew J. Wrobel
    Pages 155-156
  9. Back Matter
    Pages 157-195

About this book

Introduction

The authors present a new formal framework for finding the long-run competitive market equilibrium through short-run equilibria by exploiting the operating policies and plant valuations. This “short-run approach” develops ideas of Boiteux and Koopmans. Applied to the peak-load pricing of electricity generated by thermal, hydro and pumped-storage plants, it gives a sound and practical method of valuing the fixed assets—in this case, the river flows and the geological sites suitable for reservoirs. Its main mathematical basis is the producer’s short-run profit maximization programme and its dual; their solutions have relatively simple forms that can greatly ease the fixed-point problem of solving for the general equilibrium. Since the optimal values (profit and cost functions) are usually nondifferentiable—this is so when there are joint costs of production such as capacity constraints—nonsmooth calculus is employed to resolve long-standing discrepancies between textbook theory and industrial reality by giving subdifferential extensions of basic results of microeconomics, including the Wong-Viner Envelope Theorem.

Keywords

Competitive equilibrium Shadow pricing Plant evaluation Wong-Viner Envelope Theorem Public utility pricing

Authors and affiliations

  • Anthony Horsley
    • 1
  • Andrew J. Wrobel
    • 2
  1. 1.(1939-2006)WatfordUnited Kingdom
  2. 2.WarsawPoland

Bibliographic information

  • DOI https://doi.org/10.1007/978-3-319-33398-4
  • Copyright Information Springer International Publishing Switzerland 2016
  • Publisher Name Springer, Cham
  • eBook Packages Economics and Finance
  • Print ISBN 978-3-319-33397-7
  • Online ISBN 978-3-319-33398-4
  • Series Print ISSN 0075-8442
  • Series Online ISSN 2196-9957
  • About this book