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Network diseconomies and optimal structure

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Author Info
Sherrill Shaffer

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Abstract

This paper explores the effect on costs when firms within an industry must interact with each other in the normal course of business. Such interaction will generally cause the socially optimal scale of each firm to deviate from its minimum average cost scale. In addition, the socially optimal industry structure may be more concentrated than conventional firm-level cost studies would suggest and may also differ from the unregulated (free-entry) equilibrium structure. These concepts, while potentially applicable to several industries, are here made more precise for the banking industry, both theoretically and empirically.

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Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 97-19.

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Date of creation: 1997
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Handle: RePEc:fip:fedpwp:97-19

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Related research
Keywords: Bank mergers ; Economies of scale ; Theory of the firm;

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    Other versions:
  3. Shaffer, Sherrill, 1994. "A Revenue-Restricted Cost Study of 100 Large Banks," Applied Financial Economics, Taylor and Francis Journals, vol. 4(3), pages 193-205, June. [Downloadable!] (restricted)
    Other versions:
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    Other versions:
  5. James McAndrews & William Roberds, 1997. "A model of check exchange," Working Papers 97-16, Federal Reserve Bank of Philadelphia. [Downloadable!]
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  13. Broecker, Thorsten, 1990. "Credit-Worthiness Tests and Interbank Competition," Econometrica, Econometric Society, vol. 58(2), pages 429-52, March. [Downloadable!] (restricted)
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  25. repec:fip:fedreq:y:1990:i:sep:p:38-50:n:v.76no.5 is not listed on IDEAS
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    Other versions:
  28. Barnett, William A & Lee, Yul W, 1985. "The Global Properties of the Miniflex Laurent, Generalized Leontief, and Translog Flexible Functional Forms," Econometrica, Econometric Society, vol. 53(6), pages 1421-37, November. [Downloadable!] (restricted)
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