In the peak-load pricing model in Example 7.4, we assumed that the capacity level is a decision variable. Assume now that capacity has already been set at 30 kwh. (Note that the cost of capacity is...

In the peak-load pricing model in Example 7.4, we assumed that the capacity level is a decision variable. Assume now that capacity has already been set at 30 kwh. (Note that the cost of capacity is now a sunk cost, so it is irrelevant to the decision problem.) Change the model appropriately and run Solver. Then use SolverTable to see how sensitive the optimal solution is to the capacity level, letting it vary over some relevant range. Does it appear that the optimal prices are set so that demand always equals capacity for at least one of the two periods of the day?

Example 7.4