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Replication and Returns to Scale in Production

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  • Jensen Christian

    (Department of Economics, University of South Carolina, 1705 College Street, Columbia, SC 29208, USA)

Abstract

Replication alone does not yield a smooth constant-returns-to-scale production function as those usually assumed in the literature. However, such a function arises endogenously with replication, driven by profit-maximization, if the efficiency of the underlying production process varies with the intensity it is operated at, and reaches a maximum at a stationary point. The result applies when the number of production processes must be discrete, thus overcoming the so-called integer problem. When inputs are non-rival, public goods or generated by externalities, replication can lead to increasing or decreasing returns to scale.

Suggested Citation

  • Jensen Christian, 2014. "Replication and Returns to Scale in Production," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 14(1), pages 127-148, February.
    • Handle: RePEc:bpj:bejtec:v:14:y:2014:i:1:p:22:n:5
    DOI: 10.1515/bejte-2013-0040
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    References listed on IDEAS

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    More about this item

    Keywords

    replication; returns to scale in production; integer problem; indivisibilities; externalities; non-rival inputs;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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