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An Output Orientated Non Parametric Measure of Economies of Scope

Author

Listed:
  • Mario Fortin

    (GREDI, Département d'économique, Université de Sherbrooke)

  • André Leclerc

    (GREDI, Université de Sherbrooke and GEREM, Université de Perpignan)

Abstract

Economies of scope are present when producing jointly a diversified basket of goods and services is less costly than their separate production. Data Envelopment Analysis (DEA) can estimate economies of scope by the difference between input requirement sets of diversified and specialized firms and are applicable only when both specialized and diversified firms are present in the sample. We develop a measure of economies of scope to an output orientated DEA model even when the sample comprises only diversified firms, to obtain radial estimation of economies of scope. Our method puts in evidence that economies of scope are influenced by scale inefficiencies, and if these inefficiencies are left aside, diseconomies of scope are impossible.

Suggested Citation

  • Mario Fortin & André Leclerc, 2006. "An Output Orientated Non Parametric Measure of Economies of Scope," Cahiers de recherche 06-22, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    • Handle: RePEc:shr:wpaper:06-22
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    File URL: http://gredi.recherche.usherbrooke.ca/wpapers/GREDI-0622.pdf
    File Function: First version, 2006
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    Cited by:

    1. Leclerc, André & Fortin, Mario, 2009. "Économies d’échelle et de gamme dans les coopératives de services financiers : une approche non paramétrique (DEA)," L'Actualité Economique, Société Canadienne de Science Economique, vol. 85(3), pages 263-282, septembre.

    More about this item

    Keywords

    Economies of scope; DEA;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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