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A Composite Cost Function for Multiproduct Firms with an Application to Economies of Scope in Banking

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Author Info
Pulley, Lawrence B
Braunstein, Yale M
Abstract

The composite cost function the authors propose combines a quadratic output structure with a log-quadratic input price structure and is well suited for examining economies of scope, subadditivity, and other important properties of multiproduct firms. To compare the composite model with an appropriate set of alternative functional forms, they develop a parsimonious--but general--specification that nests the standard translog cost function, the generalized translog cost function, a separable quadratic cost function, and the composite cost function. An application to economies of scope in banking confirms the advantages of the composite model. Copyright 1992 by MIT Press.

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Publisher Info
Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 74 (1992)
Issue (Month): 2 (May)
Pages: 221-30
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Handle: RePEc:tpr:restat:v:74:y:1992:i:2:p:221-30

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  1. Santiago Carbó Valverde & Francisco Rodríguez Fernández, 2004. "Scope Economies and Competition Beyond the Balance Sheet: a ‘broad banking’ Experience," Economic Working Papers at Centro de Estudios Andaluces E2004/13, Centro de Estudios Andaluces. [Downloadable!]
  2. Muliaman D. Hadad & Maximilian J. B. Hall & Wimboh Santoso & Ricky Satria & Karligash Kenjegalieva & Richard Simper, 2008. "Banking Efficiency and Stock Market Performance: An Analysis of Listed Indonesian Banks," Discussion Paper Series 2008_07, Department of Economics, Loughborough University, revised Aug 2008. [Downloadable!]
  3. Bloch, Harry & Madden, Gary G & Savage, Scott J, 2001. "Economies of scale and scope in Australian telecommunications," MPRA Paper 11154, University Library of Munich, Germany. [Downloadable!]
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  4. Carlos Budnevich & Helmut Franken & Ricardo Paredes, 2001. "Economías de Escala y Economías de Ámbito en el Sistema Bancario Chileno," Working Papers Central Bank of Chile 93, Central Bank of Chile. [Downloadable!]
  5. Sherrill Shaffer, 1998. "Functional Forms and Declining Average Costs," Journal of Financial Services Research, Springer, vol. 14(2), pages 91-115, October. [Downloadable!] (restricted)
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  6. Wilko Bolt & David Humphrey, 2007. "Payment network scale economies, SEPA, and cash replacement," Working Papers 07-32, Federal Reserve Bank of Philadelphia. [Downloadable!]
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  7. Allen Webster, 1997. "The impact of technological change on bank performance," Journal of Economics and Finance, Springer, vol. 21(3), pages 41-47, September. [Downloadable!] (restricted)
  8. Lawrence Pulley & Allen Berger & David Humphrey, 1993. "Do Consumers Pay for One-Stop Banking?," Center for Financial Institutions Working Papers 94-01, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
  9. J. David Cummins & Mary A. Weiss, 1998. "Analyzing Firm Performance in the Insurance Industry Using Frontier Efficiency Methods," Center for Financial Institutions Working Papers 98-22, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
  10. Robert DeYoung & Kenneth Spong & Richard J. Sullivan, 1999. "Who's minding the store? motivating and monitoring hired managers at small, closely held firms: the case of commercial banks," Working Paper Series WP-99-17, Federal Reserve Bank of Chicago. [Downloadable!]
  11. David Humphrey & Magnus Willesson & Goran Bergendahl & Ted Lindblom, 2003. "Cost savings from electronic payments and ATMs in Europe," Working Papers 03-16, Federal Reserve Bank of Philadelphia. [Downloadable!]
  12. Patricia Triunfo, 2001. "Economías de escala y de alcance de las instituciones de asistencia médica colectiva en Uruguay," Documentos de Trabajo (working papers) 1201, Department of Economics - dECON. [Downloadable!]
  13. Ottoz Elisabetta & Di Giacomo Marina, 2008. "Diversification strategies and scope economies evidence from a sample of Italian bus transport providers," Department of Economics Working Papers 200802, University of Turin. [Downloadable!]
  14. David B. Humphrey, 1994. "Delivering deposit services: ATMs versus branches," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 59-81. [Downloadable!]
  15. Bloch, Harry & Madden, Gary G & Coble-Neal, Grant, 2001. "The cost structure of Australian telecommunications," MPRA Paper 11019, University Library of Munich, Germany. [Downloadable!]
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  16. Allen N. Berger & J. David Cummins & Mary A. Weiss & Hongmin Zi, 1999. "Conglomeration versus strategic focus: evidence from the insurance industry," Finance and Economics Discussion Series 1999-40, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  17. Ogunyinka, Ebenezer & Featherstone, Allen, 2003. "On The Choice Of Functional Forms In The Measurement Of Scale And Scope Economies: Generalized Box-Cox And Composite Cost Functions," 2003 Annual Meeting, February 1-5, 2003, Mobile, Alabama 35057, Southern Agricultural Economics Association. [Downloadable!]
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