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Increasing Returns to Size and Their Limits

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  • Guesnerie, Roger
  • Oddou, Claude

Abstract

A model of organization is proposed in which factors for increasing returns to size and factors for decreasing returns to size are in co nflict. The former effect reflects standard efficiency gains associat ed with economies of scale. The latter arises from inefficiencies (which are modeled in a crude way) in decision making of large organization s. Generalizing their previous work, the authors give a criterion, the existence of n-multilateral merging agreements, which is reasonably simple in view of the complexity of the problem and ensures that increasing returns unambiguously dominate decreasing returns. The bas ic result is then extended in several directions. Copyright 1988 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Guesnerie, Roger & Oddou, Claude, 1988. "Increasing Returns to Size and Their Limits," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(3), pages 259-273.
    • Handle: RePEc:bla:scandj:v:90:y:1988:i:3:p:259-73
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    Cited by:

    1. Drèze, Jacques & Le Breton, Michel & Savvateev, Alexei & Weber, Shlomo, 2008. ""Almost" subsidy-free spatial pricing in a multi-dimensional setting," Journal of Economic Theory, Elsevier, vol. 143(1), pages 275-291, November.
    2. Anna Bogomolnaia & Michel Le Breton & Alexei Savvateev & Shlomo Weber, 2008. "Heterogeneity Gap in Stable Jurisdiction Structures," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(3), pages 455-473, June.
    3. Michel Le Breton & Shlomo Weber, 2003. "The Art of Making Everybody Happy: How to Prevent a Secession," IMF Staff Papers, Palgrave Macmillan, vol. 50(3), pages 1-4.
    4. Eran Manes & Anat Tchetchik & Yosef Tobol & Ronen Durst & Gabriel Chodick, 2019. "An Empirical Investigation of “Physician Congestion” in U.S. University Hospitals," IJERPH, MDPI, vol. 16(5), pages 1-17, March.
    5. D. Fiaschi & P. M. Pacini, 1998. "Endogenous Coalition Formation With Identical Agents," Working Papers 309, Dipartimento Scienze Economiche, Universita' di Bologna.
    6. Gabrielle Demange, 2004. "Group formation: The interaction of increasing returns and preferences' diversity," DELTA Working Papers 2004-30, DELTA (Ecole normale supérieure).
    7. Fershtman, Chaim & Kalai, Ehud, 1991. "Complexity Considerations and Market Behavior," Foerder Institute for Economic Research Working Papers 275506, Tel-Aviv University > Foerder Institute for Economic Research.
    8. Gabrielle Demange, 2004. "On Group Stability in Hierarchies and Networks," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 754-778, August.
    9. Le Breton, Michel & Weber, Shlomo, 2004. "Group Formation with Heterogeneous Sets," IDEI Working Papers 288, Institut d'Économie Industrielle (IDEI), Toulouse.

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