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Scale Economies in the Multiplant Firm: Theory and Empirical Evidence

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  • Alan R. Beckenstein

Abstract

Central to the theory of the firm, economies of scale are the first line of defense for industrial concentration and for large business enterprises. But the literature on economies of scale deals primarily with the plant. Little empirical work has been done on firm scale economies, especially the multiplant firm. This paper takes issue with the common practice by economists of dismissing multiplant scale economies as vague or absent. After constructing an analytical framework for studying economies of scale in a multiple-plant setting, an optimization approach is used to quantitatively estimate multiplant scale economies of a particular type in two industries. Also developed are estimates of economies of scale from firm size, properly embedded in a multiplant analysis. The empirical results yield some interesting observations on the complexity of the concept of optimal plant size.

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  • Alan R. Beckenstein, 1975. "Scale Economies in the Multiplant Firm: Theory and Empirical Evidence," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 644-657, Autumn.
    • Handle: RePEc:rje:bellje:v:6:y:1975:i:autumn:p:644-657
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    Cited by:

    1. P Hansen & J-F Thisse, 1977. "Multiplant Location for Profit Maximisation," Environment and Planning A, , vol. 9(1), pages 63-73, January.
    2. Gokan, Toshitaka & Kichko, Sergey & Thisse, Jacques-François, 2019. "How do trade and communication costs shape the spatial organization of firms?," Journal of Urban Economics, Elsevier, vol. 113(C).
    3. Sangwon Moon, 1989. "Application of generalized benders decomposition to a nonlinear distribution system design problem," Naval Research Logistics (NRL), John Wiley & Sons, vol. 36(3), pages 283-295, June.
    4. Stefan Baumgartner, 2001. "Heinrich von Stackelberg on joint production," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 8(4), pages 509-525.
    5. Vergés-Jaime, Joaquim, 2020. "Economics as a Science -or viewed from the perspective of scientists in other fields," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 4(2), pages 247-257.
    6. van Hulst, W.G.H., 1981. "On the concept of divergence in the theory of industrial organization," Research Memorandum FEW 102, Tilburg University, School of Economics and Management.
    7. van Hulst, W.G.H., 1981. "On the concept of divergence in the theory of industrial organization," Other publications TiSEM 8e4de17e-5187-487f-adc9-d, Tilburg University, School of Economics and Management.

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