Joint production with `restricted free disposal' (Q2708050)

In contrast to single-product systems, we are faced in joint production systems with the problem of not been able to meet exactly the demand. Either we might have unwanted quantities of some products or we would have to accept negative activity levels. The usual approach in the literature to that problem is to apply the rule of free goods. These are goods wich, if they are left where they are and as they are, cause neither costs nor give benefits. In many situations the rule of free goods cannot be applied, for example if recycling or pollution is taken into account. The author proposes the concept of restricted free disposal, where free disposal is permitted for some products that are considered harmless. For other products excess production cannot exceed given tolerated levels. The author shows that the conditions for the existence of cost-minimizing joint production systems with free disposal carry over to joint production systems with restricted free disposal systems. The assumptions which have to be made is that potential bads are not used at all or, if they are used by some processes, then these processes do not produce potential bads. Therefore, the concept of restricted free disposal is a useful generalization of the concept of free goods.