Sectors May Use Multiple Technologies Simultaneously - The Rectangular Choice-of-Technology Model with Binding Factor Constraints

Abstract

We develop the rectangular choice-of-technology model with factor constraints, or RCOT, for analysis of the economy of a single region, or of multiple regions in the context of a model of the world economy. RCOT allows for one or more sectors to operate more than one technology simultaneously, using the relatively lowest-cost one first and adding another if and when the preceding one encounters a binding factor constraint. The model is motivated by the evident fact that oil wells and mineral deposits of different qualities may be exploited simultaneously, as may the use of both primary and recycled sources for the same materials. RCOT generalizes Carter’s choice-of-technology model, which allowed one of two choices to all sectors, for up to q choices and adds the factor constraints that allow several alternatives to operate simultaneously. The Appendix gives a numerical example.