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Economies of Scale in Multi-product Firms: An Empirical Analysis

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  • Kim, H Youn
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    Abstract

    This paper presents new evidence on scale economies in multiproduct firms. Previous studies are limited in view of r ecent advances in the theory of the multiproduct firm. The water util ity is chosen here as a multiproduct firm providing multiple services to various classes of customers with spatial variation. A translog m ultiproduct cost function is estimated, based on duality between tran sformation and cost functions. The paper analyzes overall, as well as product-specific, scale economies. It also discusses ray average cos t curves and derives the M locus which provides useful information on scope economies and the cost-minimizing number of firms. Copyright 1987 by The Review of Economic Studies Limited.

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    Bibliographic Info

    Article provided by London School of Economics and Political Science in its journal Economica.

    Volume (Year): 54 (1987)
    Issue (Month): 214 (May)
    Pages: 185-206

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    Handle: RePEc:bla:econom:v:54:y:1987:i:214:p:185-206

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    Cited by:
    1. Steven Renzetti, 1999. "Municipal Water Supply and Sewage Treatment: Costs, Prices and Distortions," Canadian Journal of Economics, Canadian Economics Association, vol. 32(3), pages 688-704, May.
    2. Finn Førsund & Lennart Hjalmarsson, 2004. "Are all Scales Optimal in DEA? Theory and Empirical Evidence," Journal of Productivity Analysis, Springer, vol. 21(1), pages 25-48, January.
    3. H. Youn Kim, 2003. "Intertemporal production and asset pricing: a duality approach," Oxford Economic Papers, Oxford University Press, vol. 55(2), pages 344-379, April.
    4. Romano, Giulia & Guerrini, Andrea, 2011. "Measuring and comparing the efficiency of water utility companies: A data envelopment analysis approach," Utilities Policy, Elsevier, vol. 19(3), pages 202-209.
    5. Linz, Teresa & Tsegai, Daniel W., 2009. "Industrial Water Demand analysis in the Middle Olifants sub-basin of South Africa: The case of Mining," Discussion Papers 49927, University of Bonn, Center for Development Research (ZEF).
    6. Tsegai, Daniel W. & Linz, Teresa & Kloos, Julia, 2009. "Economic analysis of water supply cost structure in the Middle Olifants sub-basin of South Africa," Discussion Papers 49926, University of Bonn, Center for Development Research (ZEF).
    7. Nauges, Celine & van den Berg, Caroline, 2007. "How"natural"are natural monopolies in the water supply and sewerage sector ? Case studies from developing and transition economies," Policy Research Working Paper Series 4137, The World Bank.
    8. Abbott, Malcolm & Cohen, Bruce, 2009. "Productivity and efficiency in the water industry," Utilities Policy, Elsevier, vol. 17(3-4), pages 233-244, September.
    9. Mehdi Farsi & Massimo Filippini, 2008. "Effects of ownership, subsidization and teaching activities on hospital costs in Switzerland," Health Economics, John Wiley & Sons, Ltd., vol. 17(3), pages 335-350.
    10. Kristof De Witte & Elbert Dijkgraaf, 2007. "Mean and Bold?," Tinbergen Institute Discussion Papers 07-092/3, Tinbergen Institute.
    11. Scorsone, Eric, 2007. "School District and Municipal Reorganization: Research Findings & Policy Proposals," Staff Papers 6543, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    12. Peeter Peda & Giuseppe Grossi & Margo Liik, 2013. "Do ownership and size affect the performance of water utilities? Evidence from Estonian municipalities," Journal of Management and Governance, Springer, vol. 17(2), pages 237-259, May.
    13. Harimaya, Kozo, 2008. "Impact of nontraditional activities on scale and scope economies: A case study of Japanese regional banks," Japan and the World Economy, Elsevier, vol. 20(2), pages 175-193, March.
    14. World Bank, 2006. "Poverty, Growth, and Environment in Brazil : Spatial Insights for Policymaking," World Bank Other Operational Studies 12852, The World Bank.
    15. Takuya Urakami, 2005. "Identifying scale economies for different types of water supply organizations in Japan," ERSA conference papers ersa05p370, European Regional Science Association.
    16. Dono, Gabriele & Giraldo, Luca, 2011. "Cost Analysis for Water Distribution in Agriculture," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114435, European Association of Agricultural Economists.
    17. Kuo, Jenn-Shyong & Ho, Yi-Cheng, 2008. "The cost efficiency impact of the university operation fund on public universities in Taiwan," Economics of Education Review, Elsevier, vol. 27(5), pages 603-612, October.

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