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Conditions for Economies of Scope in the Presence of Fixed Costs

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  • Ian E. Gorman

Abstract

This article establishes necessary and sufficient conditions for economies of scope to exist, while taking into account the presence or absence of both local cost complementarity and product-specific fixed costs. In some circumstances the test developed here could show that economies of scope to not exist despite local cost complementarity or, alternatively, despite the existence of fixed costs. Conversely, the test could show that fixed costs are sufficient to generate economies of scope despite local cost anticomplementarity.

Suggested Citation

  • Ian E. Gorman, 1985. "Conditions for Economies of Scope in the Presence of Fixed Costs," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 431-436, Autumn.
    • Handle: RePEc:rje:randje:v:16:y:1985:i:autumn:p:431-436
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    Cited by:

    1. Gustavo Anríquez & Silvio Daidone, 2010. "Linkages between the farm and nonfarm sectors at the household level in rural Ghana: a consistent stochastic distance function approach," Agricultural Economics, International Association of Agricultural Economists, vol. 41(1), pages 51-66, January.
    2. Schaible, Glenn D. & Gollehon, Noel R. & Kramer, Mark S. & Aillery, Marcel P. & Moore, Michael R., 1995. "Economic Analysis of Selected Water Policy Options for the Pacific Northwest," Agricultural Economic Reports 308426, United States Department of Agriculture, Economic Research Service.
    3. Maican, Florin & Orth, Matilda, 2021. "Determinants of economies of scope in retail," International Journal of Industrial Organization, Elsevier, vol. 75(C).
    4. Chavas, Jean-Paul & Kim, Kwansoo, 2010. "Economies of diversification: A generalization and decomposition of economies of scope," International Journal of Production Economics, Elsevier, vol. 126(2), pages 229-235, August.
    5. Jean-Paul Chavas & Kwansoo Kim, 2007. "Measurement and Sources of Economies of Scope: A Primal Approach," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(3), pages 411-427, September.
    6. Dertwinkel-Kalt, Markus & Wey, Christian, 2020. "Multi-product bargaining, bundling, and buyer power," Economics Letters, Elsevier, vol. 188(C).
    7. Kenyon, G.N. & Meixell, M.J. & Westfall, P.H., 2016. "Production outsourcing and operational performance: An empirical study using secondary data," International Journal of Production Economics, Elsevier, vol. 171(P3), pages 336-349.
    8. Ferenc Kiss & Bernard Lefebvre, 1987. "Econometric models of telecommunications firms : a survey," Revue Économique, Programme National Persée, vol. 38(2), pages 307-374.
    9. Mafoua, Edouard & Hossain, Ferdaus, 2001. "Scope And Scale Economies For Multi-Product Farms: Firm-Level Panel Data Analysis," 2001 Annual meeting, August 5-8, Chicago, IL 20627, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Mafoua, Edouard, 2002. "Economies Of Scope And Scale Of Multi-Product U.S. Cash Grain Farms: A Flexible Fixed-Cost Quadratic (Ffcq) Model Analysis," 2002 Annual meeting, July 28-31, Long Beach, CA 19734, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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