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A Note on the Degree of Scale Economies when Firms Make Technology Choice

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  • Koji SHINTAKU

Abstract

We construct a simple model to demonstrate how the rm-level degree of scale economies (D-SE) is determined when rms make technology choice. In particular, we illustrate the importance of factors external to rms that affect the efficiency of rms' technology choice, when determining D-SE. We interpret the external factors as public knowledge stock. A change in public knowledge stock affects D-SE both directly through knowledge spillover reinforcing technology choice and indirectly through a change in the rm's output. When output is endogenized in a monopolistic competition model with a variable mark-up rate, an increase in public knowledge stock raises D-SE through technology upgrading if the mark- up rate is increasing in output. This can be testable because public knowledge stock has some measurements. There is an policy implication that various policies with knowledge stock affect D-SE as policies with xed costs.

Suggested Citation

  • Koji SHINTAKU, 2018. "A Note on the Degree of Scale Economies when Firms Make Technology Choice," Discussion papers e-17-015, Graduate School of Economics , Kyoto University.
    • Handle: RePEc:kue:epaper:e-17-015
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    References listed on IDEAS

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    More about this item

    Keywords

    disasters; Degree of scale economies; Technology choice; Public knowledge stock; Knowledge spillover; Variable mark-up rate.;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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