On the Degree of Scale Economies when Firms Make Technology Choice

Shintaku, Koji (2017): On the Degree of Scale Economies when Firms Make Technology Choice.

Abstract

We construct a simple model to demonstrate how the firm-level degree of scale economies (D-SE) is determined when firms make technology choice. In particular, we illustrate the importance of external factors that affect the efficiency of firms' technology choice, such as public knowledge stock, when determining D-SE. A change in public knowledge stock affects D-SE both directly and indirectly through a change in the firm's output. When output is endogenized in a monopolistic competition model with a variable mark-up rate, an increase in public knowledge stock raises D-SE through technology choice if the mark-up rate is increasing in output.

• Item Type: MPRA Paper
• Language: English
• Keywords: Degree of scale economies; Technology choice; Public knowledge stock; Variable mark-up rate.
• Subjects: D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory; D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity; F - International Economics > F1 - Trade > F10 - General; F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies ; Fragmentation; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L16 - Industrial Organization and Macroeconomics: Industrial Structure and Structural Change ; Industrial Price Indices

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