02 Horizontal Boundaries _av

8/10/2019 02 Horizontal Boundaries _av

1/19

02 THE HORIZONTAL BOUNDARIES OFTHE FIRM

Motivation

Some markets wit a !ew "ar#e!irms

Air$"anes man%!a&t%rin#

Some markets wit sma"" !irms'%a"it( resta%rants )E" B%""i*

Some markets wit +ot "ar#ean, sma"" !irms

Beer- +ankin#- so!tware

................................Some !irms $resent in man(markets

So".Me"i/- Son(- Mi&roso!t-

Ot ers in 1%st oneM&Dona",s- Eas( et )3*

Some !irms verti&a""( inte#rate,4"o+a"ia

5 i"e ot ers verti&a""(,isinte#rate,

6am$er

2


2/19

3

4


3/19


4/19

7

S&a"e e&onomies= avera#e &osts ,e&rease w ent e vo"%me o! $ro,%&tion in&reases

8

S&a"e e&onomies

T ere are e&onomies o! s&a"e w en avera#e &ost,e&reases wit o%t$%t

So!tware6ost &%rve U.s a$e,

Uni7%e o$tima" si9e !or t e !irm

6ost &%rve L s a$e,Minim%m e!!i&ient s&a"e +e(on, w i& avera#e &ost is t esame


5/19

9

10

S&o$e e&onomies

Firm A $ro,%&es two $ro,%&ts= > an, ?Firm B $ro,%&es on"( >

5 en t e &ost o! $ro,%&in# > is sma""er !or Firm A t an!or Firm B- t ere are e&onomies o! s&o$e

It is & ea$er !or one !irm to $ro,%&e +ot > an, ? t an!or two ,i!!erent !irms to s$e&ia"i9e in > an, ? ea&

T6)'>- '?* @ T6)'>- 0* T6)0- '?*T6)'>- '?* T6)0-'?* @ T6)'>- 0*

Cro,%&tion o! ? re,%&es t e in&rementa" &ost o!$ro,%&in# >


6/19

11

Some so%r&es o! e&onomies o! s&a"e

S$rea,in# o! !i


7/19

13

S$rea,in# o! !i


8/19

15

Lon# r%n v s ort r%n s&a"e e&onomies

16

Mana#ers o!ten &ite e&onomies o! s&a"e an, s&o$e to 1%sti!( investment in #rowt or a mer#er

S(ner#ies= K K G 2A&&essA&&essA&&essA&&ess to a new market- to a new te& no"o#(- et&to a new market- to a new te& no"o#(- et&to a new market- to a new te& no"o#(- et&to a new market- to a new te& no"o#(- et&

I! e&onomies o! s&a"e a+o%n,- w ( isn8t t ere a sin#"eme#a.!irm3


9/19

Dise&onomies o! s&a"e17

18

Dise&onomies o! s&a"e

Disa,vanta#es o! +ein# a "ar#e !irmBe(on, a &ertain si9e- +i##er ma( not a"wa(s +e +etter

Sometimes ma( +e worseI! avera#e &ost in&reases wit o%t$%t we ave diseconomiesdiseconomiesdiseconomiesdiseconomies ofofofofscalescalescalescale

5 ( are t ere ,ise&onomies o! s&a"e,ise&onomies o! s&a"e,ise&onomies o! s&a"e,ise&onomies o! s&a"e3In&entive an, &oor,ination e!!e&ts . +%rea%&ra&(In&reasin# "a+or &ostsS$rea,in# s$e&ia"i9e, reso%r&es too t in6on!"i&t o! interests ) 6on!"i&tin# o%tJ*


10/19

19

In&entives- &oor,ination an, +%rea%&ra&(

At t e !irm t ere is nee, to &oor,inate work an,

$rovi,e in&entivesB%rea%&ra&(

5 en a !irm #ets "ar#eIt is ,i!!i&%"t to $rovi,e in&entivesit is ,i!!i&%"t to monitor an, &omm%ni&ate wit workersit is ,i!!i&%"t to eva"%ate an, rewar, in,ivi,%a" $er!orman&e,etai"e, work r%"es ma( sti!"e t e &reativit( o! t e workers

E


11/19


12/19

T e Learnin# 6%rve

T e S"o$e as a Meas%re o! Learnin# Bene!its

T e s"o$e o! a $ro&ess is t e re"ative si9e o! t eavera#e &ost w en &%m%"ative o%t$%t ,o%+"es

A s"o$e o! 0 )t e o+serve, me,ian* in,i&ates t at t eavera#e &ost wi"" ,e&"ine +( 20 w en t e &%m%"ativeo%t$%t ,o%+"es

Learnin# !"attens o%t over time an, t e s"o$e event%a""(+e&omes K 0


13/19

Learnin# 6%rve Strate#(

E


14/19

Learnin# 6%rve an, S&a"e E&onomies

T e Cro,%&t Li!e 6(&"e


15/19

T e "earnin# &%rve an, t e $ro,%&t "i!e &(&"e

Strate#ies +ase, on t e "earnin# &%rve are o!ten

more attra&tive ear"( in t e $ro,%&t "i!e &(&"e ."earnin# is !aster at t at $oint in time

In mat%re or ,e&"inin# in,%stries- t is is not so A""re,%&tions in &osts in t e $ro,%&tion $ro&ess ,%e toe


16/19

31

32


17/19

33

S&a"e- si9e an, $ro!ita+i"it(

Re"ations i$ +etween market s are an, $ro!ita+i"it(3

Em$iri&a" evi,en&e= Cositive &orre"ation +etweenmarket s are an, $ro!ita+i"it( in man( in,%stries

6orre"ation ,oes not im$"( &a%sa"it(

In&reases in market s are im$"( an in&rease in$ro!its3

34

S&a"e- s&o$e an, market str%&t%re

Market str%&t%re= t e n%m+er an, si9e o! !irms in a marketA ke( ,eterminant is t e si9e o! ,eman, in re"ation to t e MES)minim%m e!!i&ient s&a"e* o! $ro,%&tion5 en t ere is not eno%# ,eman, in a market so t at moret an one !irm a& ieves t e MES- we sa( it is a nat%ra"mono$o"(An a$$ro


18/19

35

36


19/19

37

S&a"e- s&o$e an, market str%&t%re

Di!!eren&es in t e "eve" o! &on&entration in ,i!!erent

in,%stries an, ,i!!erent &o%ntriesP & ara&teristi&s=

6on&entration varies a&ross in,%stries

T e "eve" o! &on&entration o! an in,%str( is &om$ara+"eamon# &o%ntries

In,%stries in t e USA )Swe,en* ten, to +e "ess )more*

&on&entrate,

38

Strate#i& im$"i&ations !rom s&a"e an, s&o$ee&onomies

4rowt strate#ies=Interna" vers%s e

Documents

02 Horizontal Boundaries _av