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Dynamic Efficiency and Productivity Measurement$
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Elvira Silva, Spiro E. Stefanou, and Alfons Oude Lansink

Print publication date: 2021

Print ISBN-13: 9780190919474

Published to Oxford Scholarship Online: April 2021

DOI: 10.1093/oso/9780190919474.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 27 September 2021

Overview

Overview

Chapter:
(p.11) 1 Overview
Source:
(p.iii) Dynamic Efficiency and Productivity Measurement
Author(s):

Elvira Silva

Spiro E. Stefanou

Alfons Oude Lansink

Publisher:
Oxford University Press
DOI:10.1093/oso/9780190919474.003.0002

This chapter characterizes production in a dynamic decision-making environment. The classic characterization of static firm decision making is contrasted with the dynamic decision environment where not all inputs are freely adjusted. The latter characterization is motivated by the conjecture that transaction costs are associated with adjusting the capital stock at a rapid rate per unit of time and these costs increase rapidly with the absolute rate of investment. In fact, these costs increase so rapidly that the firm may never attempt to achieve a jump in its capital stock at any given moment. Such transaction (or adjustment) costs have implications for the nature of the technology. This interplay is introduced in this chapter and serves as a foundation for the dynamic structure that follows throughout the book.

Keywords:   dynamic production technology, adjustment cost hypothesis, short run, long run, capacity utilization, nonconvex production

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