The composite cost function the authors propose combines a quadratic output structure with a log-quadratic input price structure and is well suited for examining economies of scope, subadditivity, and other important properties of multiproduct firms. To compare the composite model with an appropriate set of alternative functional forms, they develop a parsimonious--but general--specification that nests the standard translog cost function, the generalized translog cost function, a separable quadratic cost function, and the composite cost function. An application to economies of scope in banking confirms the advantages of the composite model. Copyright 1992 by MIT Press.

An empirical study applying the theory of scale economies and inter-product complementarity. Several recently formulated concepts of the theory of scale economies are examined with the aid of estimates of cost functions, using data for publishers of scientific journals. In one case the observations are shown to fall near the outer limits of the range of declining costs, implying that neither amalgamation nor breakup of firms will reduce total cost. In another case the observations fall well within the subadditive range, implying that amalgamation can provide savings. The study confirms the applicability of the new theory of scale economies.

An empirical study applying the theory of scale economies and inter-product complementarity. Several recently formulated concepts of the theory of scale economies are examined with the aid of estimates of cost functions, using data for publishers of scientific journals. In one case the observations are shown to fall near the outer limits of the range of declining costs, implying that neither amalgamation nor breakup of firms will reduce total cost. In another case the observations fall well within the subadditive range, implying that amalgamation can provide savings. The study confirms the applicability of the new theory of scale economies.