Economics Dictionary of ArgumentsHome
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| Economies of scale: Economies of scale refer to the cost advantages that firms experience as they increase production. As output grows, the average cost per unit decreases due to factors like spreading fixed costs over more units, bulk purchasing, and improved operational efficiency. This allows larger firms to produce goods more cheaply than smaller competitors. See also Competition, Revenue, Cost, Business structure, Business, Market concentration._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Harold Demsetz on Economies of Scale - Dictionary of Arguments
Henderson I 66 Business size/economies of scale/Demsetz/Henderson/Globerman: Large firms may (…) enjoy a competitive advantage over small or medium-sized firms because of economies of scale. These exist when the cost per unit for producing any product declines as a larger number of units is produced. Henderson I 67 Economies of scale are linked to a number of potential phenomena including increased specialization and learning-by-doing. Increased specialization involves dedicating labour and physical capital to specific tasks, which reduces downtime and other ineffciencies as capital equipment and labour do not need to be relocated or re-tooled to perform alternative tasks. Learning-by-doing refers to effciency improvements that arise as workers learn through repeated experience how to perform specific tasks more effciently.* Both economies of scale and learning-by-doing can help explain Demsetz's (1973)(1) empirical findings that large firms in concentrated industries have Iower costs than medium and small firms in those industries, while large firms do not have a cost advantage in unconcentrated industries. Large size alone does not give an advantage to companies in a particular industry. If the large size is not due to economies of scale or learning-by-doing, the large company has no advantage. Indeed, if the large company has higher costs than small companies, its size will fall because it will lose market share to smaller, more-effcient firms. >Economies of Scale/Economic theories, >Antitrust laws/Policy of the US, >Antitrust laws/Demsetz, >Market concentration/Demsetz. * Alchian (1963)(2) was one of the first economists to document the empirical importance of learning-by-doing in his study of the production of aircraft frames. 1. Demsetz, Harold (1973). Industry Structure, Market Rivalry and Public Policy. Journal of Law & Economics 16, 1: 1-9. 2. Alchian, Armen (1963). Reliability of Progress Curves in Airframe Production. Econometrica 31: 679-693._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
EconDems I Harold Demsetz Toward a theory of property rights 1967 Henderson I David R. Henderson Steven Globerman The Essential UCLA School of Economics Vancouver: Fraser Institute. 2019 |
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