• Title/Summary/Keyword: Marginal Cost

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The Economic Analysis of the Determination of Optimal Management Measures and Level of Control in Fisheries Management (불완전 어업관리의 합리적 관리수단 및 규제수준의 결정에 관한 경제학적 분석)

  • 이상고;김도훈
    • The Journal of Fisheries Business Administration
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    • v.33 no.2
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    • pp.31-48
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    • 2002
  • This paper is aimed to analyze how to evaluate the choice of optimal management measures and level of control in fisheries management under the costly and imperfect management system by comparing with costless and perfect management system that is commonly assumed in the analysis of fisheries regulations. Fishermen would set the level of fishing efforts at the point where the marginal fishing profit for fishing effort is equal to the marginal level of fine under costly and imperfect management system. Therefore, under the case where the marginal fishing profit is higher than the marginal level of fine, the level of fishing efforts would be made at the point which is higher than the level of fishing efforts made under costless and perfect management system and is not a point where the economic profit is maximized in regulated fisheries. From this conclusion, the fishermens avoidance activities against regulations as well as the level of control in fisheries management substantially have an influence on the choice of fisheries management instruments. According to the analysis of optimal fisheries management policy, the economic profits in regulated fisheries are determined by the level of fisheries enforcement costs and total fishing profits, in which as enforcement costs increase the economic profits decrease. In addition, the economic profits vary in response to the level of control in avoidance activities. That is, as avoidance costs decrease, the economic profits increase. The determination of optimal level of control in fisheries management should be made at the point where the marginal regulation costs are equal to the marginal profits from regulated fisheries, in which marginal regulation costs are different according to the type of management measures. And the level of profits changes in response to different levels of avoidance activities. The management measure that can maximize the difference between the marginal regulation costs and marginal profits from regulated fisheries should be chosen as an optimal fisheries management instrument.

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Contribution of Road Capital in Industry and Optimal Level of Road Capital in South Korea (한국 도로 자본의 산업에 대한 영향과 도로자본 스톡의 최적수준 분석)

  • Kook, Woo Kag
    • International Journal of Highway Engineering
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    • v.15 no.3
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    • pp.137-149
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    • 2013
  • PURPOSES: This study is to suggest the Contribution of Road Capital in Industry and Optimal Level of Road Investment in South Korea METHODS: Based on the literature review, This research is empirically estimated using disaggregate and disaggregated data composed of 10-sectors covering the entire korea economy for the period 1970~2000. The relevant policy questions addressed in this report are : cost reduction and Scale elasticities of road, effect of road capital stock on demand for labor, capital and materials, marginal effect of road, industry TFP growth decomposition, Net Social Rates of Returns, optimal of road capital. RESULTS : The marginal benefits of the road capital at the industry level were calculated using the estimated cost elasticities. Demand for the road capital services varies across industries as do the marginal effects. The marginal benefits are positive for the principal industries. This suggests that for these industries the existing stock of road capital may be under supplied. CONCLUSIONS: This results emerges is that the ratio of the optimum to actual road capital, measured by road, was high at beginning of the period 1970s and declined 1990s. There appears to be evidence of under-investment in road capital. That is continuous and premeditated investment for road which lead to saving time and finance.

Downsizing and Price Increases in Response to Increasing Input Cost (제조비용 증가에 대한 대응 전략으로서 제품 크기 축소와 가격 인상의 비교 연구)

  • Kang, Yeong Seon;Kang, Hyunmo
    • Korean Management Science Review
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    • v.32 no.1
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    • pp.83-100
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    • 2015
  • We analyze a duopoly competition when two firms face input cost increases. The objective of this study is to determine the firms' optimal strategy between a price increase and downsizing under conditions of a spatially differentiated market and consumers' diminishing utility on the product size. We develop a theoretical model of two competing firms offering homogenous products using the standard Hotelling model to determine how firms' optimal strategies change when facing input cost increases. In this paper, there are two types of duopoly competitions: symmetric and asymmetric. In the symmetric case, the two firms have the same marginal cost and are producing and selling identical products. In the asymmetric case, the two firms have different marginal costs. The results show that the optimal strategy decision depends on the size of the input cost increase and the cost differences between the two firms. We find that when two firms are asymmetric (i.e., they have different marginal costs), the two firms might choose asymmetric pairs of strategies in equilibrium under certain conditions. When the cost differences between the two firms are sufficiently large and the cost increase is sufficiently small, the cost leader chooses price increase, and the cost-disadvantaged firm chooses downsizing in equilibrium. This asymmetric strategy reduces price competition between two firms, and consumers are better off. When the cost differences between the two firms are sufficiently large, downsizing is the dominant strategy for the cost-disadvantaged firm. The cost-disadvantaged firm finds it more profitable to reduce the product size than to increase its price to reduce price competition, because consumers prefer downsizing to price increases. This paper might be a good starting point for further analytical research in this area.

The Proportional Method for Inventory Cost Allocation (재고비용할당을 위한 비례적 접근법)

  • Lee, Dongju
    • Journal of Korean Society of Industrial and Systems Engineering
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    • v.41 no.4
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    • pp.220-227
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    • 2018
  • The cooperative game theory consists of a set of players and utility function that has positive values for a subset of players, called coalition, in the game. The purpose of cost allocation method is to allocate the relevant cost among game players in a fair and rational way. Therefore, cost allocation method based on cooperative game theory has been applied in many areas for fair and reasonable cost allocation. On the other hand, the desirable characteristics of the cost allocation method are Pareto optimality, rationality, and marginality. Pareto optimality means that costs are entirely paid by participating players. Rationality means that by joining the grand coalition, players do not pay more than they would if they chose to be part of any smaller coalition of players. Marginality means that players are charged at least enough to cover their marginal costs. If these characteristics are all met, the solution of cost allocation method exists in the core. In this study, proportional method is applied to EOQ inventory game and EPQ inventory game with shortage. Proportional method is a method that allocates costs proportionally to a certain allocator. This method has been applied to a variety of problems because of its convenience and simple calculations. However, depending on what the allocator is used for, the proportional method has a weakness that its solution may not exist in the core. Three allocators such as demand, marginal cost, and cost are considered. We prove that the solution of the proportional method to demand and the proportional method to marginal cost for EOQ game and EPQ game with shortage is in the core. The counterexample also shows that the solution of the proportional method to cost does not exist in the core.

Optimal Traffic Control Method by the Cost-analytic Operations Model in Heterogeneous Network Environment (다중 네트워크 환경하에서의 한계 비용 함수에 의한 최적 트래픽 제어 기법)

  • Kim, Jae-Hoon
    • The Journal of Korean Institute of Communications and Information Sciences
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    • v.32 no.10A
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    • pp.941-949
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    • 2007
  • By the newly emerging Network access technology, we face the new heterogeneous network environment. The required level of service quality and diversity are now multiplied by the increment of wireless service subscribers. Focusing on the co-existence of multiple access network technology and the complex service needs of users, the wireless service operators should present the stable service quality for every user. The service operators should build the new operation framework which combines the pre-established networks and newly adopted ones. Our problem is finding the optimal heterogeneous network operation framework. We suggest a market-based marginal cost function for evaluating the relative value of resource of each network and develop the whole new heterogeneous network operation framework.

Optimal Optional Two-Part Tariffs for Telecommunication Services (정보통신서비스의 최적선택이부요금)

  • Oh, Hyung-Sik
    • Journal of Korean Institute of Industrial Engineers
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    • v.20 no.3
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    • pp.55-63
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    • 1994
  • Optional two-part tariffs are in growing use in telecommunication services markets. This paper considers the problem of designing profit-maximizing optional two-part tariffs for heterogeneous user groups. It is shown that, at an optimum, one of usage charges among a set of optional two-part tariffs should be made equal to marginal cost. It is also shown that, if demand curves cross, then one of usage charges at the optimum can be below marginal cost. An example with linear demand functions is given to illustrate the important features of optimal two-part tariffs.

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Versioning Digital Products (디지털상품의 품질 차별화)

  • Yoo Keuk Ryoul
    • Korean Management Science Review
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    • v.21 no.3
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    • pp.1-12
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    • 2004
  • The paper demonstrates that versioning of digital products occurs more frequently than that of physical products because of low marginal cost. The versioning occurs no matter what a customer knows his/her reservation price. Low-quality version will not be produced when the difference between reservation prices is very large. The paper also shows that a firm tries to lower the quality of low-quality product to prevent customers with high reservation prices from purchasing low-quality product.

An Analytic Algotithm to Estimate Expected Generation and Marginal Costs (발전 및 한계비용의 해석적 추정법에 관한 연구)

  • 박영문;서보혁
    • The Transactions of the Korean Institute of Electrical Engineers
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    • v.31 no.7
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    • pp.1-10
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    • 1982
  • This paper derives the algorithm to estimate the operating cost, its marginal cost, and the reliability indices for the long term planning of power system. Treating the load duration curve and the system in the stochastic sense takes the place of the inverted load duration curve, effective load duration curve, and the numerical integration in the conventional methods. The time and accuracy of computation are substantially improved due to the fact that all expressions are represented by simple analytic form instead of the existing recursive form.

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A Study on Establishing Operation Mathematical Model for Optimum Capacity Estimation of the ESS Applications for each in the Nationwide Perspective (국가적 관점에서 용도별 ESS 적정용량 산정을 위한 운전수리모델 수립에 대한 연구)

  • Kim, Jung-Hoon;Youn, Seok-Min
    • The Transactions of The Korean Institute of Electrical Engineers
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    • v.65 no.6
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    • pp.969-978
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    • 2016
  • Around the world are increasing the demand for ESS. Currently, the domestic is expected to benefit by operating ESS. In the domestic, it is expected to benefit from operations of the installed ESS because of the introduction of ESS less capacity. However ESS capacity to the maximum profit occurs is unknown. ESS is different from the charge-discharge characteristics and the reserve to replace, depending on the application. Therefore, it should be established in accordance with the ESS optimal capacity according to the purpose used because it can maximize the quality and efficiency of the electric energy. To the ESS optimal capacity estimation by the purpose used, It should compare the investment cost caused by ESS facility installation and operation cost caused by operating ESS. In this paper, the operation mathematical model for estimating marginal operation costs established. In operation mathematical model, operating cost is considered fuel cost and no-load cost start-up cost. Because no-load cost and start-up cost are not related to cost and power plant output, there are expressed an integer variable costs as a step function.

Economics of Supply Chain Contracting for Quality

  • Kim Taeho
    • Proceedings of the Korean Operations and Management Science Society Conference
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    • 2004.10a
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    • pp.539-553
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    • 2004
  • This paper models and solves contracting schemes for both when quality is perfectly observable and when quality is not perfectly observable in supply chain. When quality is perfectly observable, the first-best optimal solution which is that the marginal utility of procurer obtained from the quantity and quality supplied by suppliers (the price) is equal to the marginal cost to produce the quantity and quality is obtained. However, when quality is not perfectly observable to procurers the optimal solution cannot be the first-best but the second-best where the price is greater than the marginal cost to produce the quantity and quality and social welfare is less than that of the first-best solution.

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