Cost Prices and Partially Fixed Factor Proportions in Energy Substitution

摘要

The objective of this paper is to propose an approach in production economics which incroporates the aspect of substitutability in the neoclassical theory as well as the aspect of partially fixed factor proportions in the Walras-Leontief approach. The crucial idea is to decompose the input quantity in a component bound by the use of other inputs and in a component unbound or free for substitution. From the cost side this partitioning implies that the effective price of a factor consists of the own price as well as of weighted prices of the other inputs with weights indicating which inputs are bound in which order of magnitude to the use of a unit of the corresponding factor of production. (ERA citation 09:009982)