SFB 303 Discussion Paper No. A - 607
Author: Nehring, Klaus und Clemens Puppe
Title: Modelling Economies of Scope
Abstract: Economies of scope arise from synergies in the production of similar goods. The classical
notion of joint production explains instances of such synergies by the fact that some factors
of production are pure public inputs. We argue that this explanation applies much more
generally than is usually assumed in the literature. Specifically, we show that the
applicability of the joint public input explanation is essentially characterized by the
property that synergies are decreasing as the scope of production increases; we also argue that
the latter property of "substitutive" synergies represents the normal case. Secondly, we
formalize a notion of comparative similarity of goods both in terms of the structure of inputs
and in terms of the cost function itself. This leads to a structured repertoire of models of
economies of scope, among which we determine a privileged subclass that combines flexibility
with reduction of complexity and interpretability.
Keywords: Economies of scope, cost function, public inputs, similarity, conjugate Moebius inverse
JEL-Classification-Number: L11,D20
Creation-Date: December 1999
Unfortunately this paper is not available online. Please contact us to order a hardcopy.
SFB 303 Homepage
, Webmaster