Q2 Z2,(Q2) Z2(Q2) - Institute for Water Resources - U.S. Army

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are significant at the .99 level, except for year (which has an F-value
of less than one). Thus, the function was re-estimated excluding year.
Looking first at the results for towboat characteristics, we see
that the coefficient of log io horsepower is negative and significant.
One would expect the horsepower of a towboat to be one of the most
significant elements in determing towboat cost. The negative sign for
horsepower indicates that the.average cost of an-EBM declines as larger
boats are employed. It is possible to think of horsepower as a measure
of "plant" size. The curve of the function traced out by increasing
horsepower (allowing EBM's to adjust optimally) could . be viewed as a
long-run average cost curve. This curve would be downward sloping
. .
throughout the range of actual operations'. Viewed in this way, towboat
operations exhibit long-run decreasing costs.
• .
Care should be exercised, however, in making this observation. We
. ..
know, from the production function, that for operations on a given river
district, horsepower exhibits diminishing productivity. Thus, it must
be true that the average cost curve will turn up after some point. That
is, it is certainly not possible to increase horsepower indefinitely
and expect long-run average costs to fall. There is, nevertheless,
reason to believe that average towboat costs are falling throughout a
wide range of current operations.
The results for Kort nozzles show that the presence of this feature
on a towboat has a significant influence on average cot. The coefficient
for Kort nozzles is negative and significant. Use of the Kort nozzle
implies an overall reduction of 15% in average cost. For example, multi-
plying mean average cost and mean EBM, the total cost of mean EBM (almost
.