Scale Economies, Scope Economies, and Technical Change in Federal Reserve Payment Processing

In the past decade, the U.S. economy has witnessed a tremendous surge in the usage of electronic payment processing services and an increased importance of the firms that provide these services. In this paper,we estimate scale economies, scope economies, and technical change in the Federal Reserve's provision of payments processing from 1990 to 2000. We find considerable scale economies and evidence of some scope economies for the provision of automated clearinghouse, Fedwire, and Book-Entry services no matter whether we specify a separable quadratic or a translog cost function. In addition, we find that disembodied technical change also contributed to the overall reduction in costs throughout the 1990s.

In the past decade, the U.S. economy has witnessed a tremendous surge in the usage of electronic payment processing services and an increased importance of the firms that provide these services. The payments industry has also undergone changes in cost structure with the introduction of new technology. Unfortunately, data on the private provision of payment processing services are not available. However, the Federal Reserve provides similar services and collects data on its own provision of payments processing, offering an opportunity to gain insights into the cost structure of payments processing. In this paper, we estimate the scope and scale economies and the technical change in the Federal Reserve's provision of payments processing from 1990-2000. We find considerable scale economies and evidence of some scope economies for the provision of automated clearinghouse, Fedwire, and book-entry services no matter whether we specify a separable quadratic or a translog cost function. In addition, we find that disembodied technical change also contributed to the overall reduction in costs throughout the 1990s.

In the past decade, the U.S. economy has witnessed a tremendous surge in the usage of electronic payment processing services and an increased importance of the firms that provide these services. The payments industry has also undergone changes in cost structure with the introduction of new technology. Unfortunately, data on the private provision of payment processing services are not available. However, the Federal Reserve provides similar services and collects data on its own provision of payments processing, offering an opportunity to gain insights into the cost structure of payments processing. In this paper, we estimate the scope and scale economies and the technical change in the Federal Reserve's provision of payments processing from 1990-2000. We find considerable scale economies and evidence of some scope economies for the provision of automated clearinghouse, fedwire, and book-entry services no matter whether we specify a separable quadratic or a translog cost function. In addition, we find that disembodied technical change also attributed to the overall reduction in costs through the 1990s.

An empirical analysis of scale and scope economies and technical change in an Irish multiproduct banking firm

The aim in this paper is to investigate economies of scale and scope among Norwegian dairy and crop producing farms, controlling for regional differences. Unlike previous studies in which a common technology was assumed, we estimate economies of scale and scope to account for different technologies for specialized and mixed (diversified) farms. Our analysis is based on translog cost functions using farm-level data for the period 1991-2014. The results suggest that both economies of scale and scope persist in Norwegian dairy and crop producing farms. We also find that dairy farms have an economic incentive to integrate dairy farming with crop production in all regions of Norway.

Cooling system of char in coal gasification apparatus : Fujikawa, A. and Egashira, T. Jpn. Kokai Tokkyo Koho JP 2002 302, 683 (Cl. C10J3/46), 18 Oct 2002, Appl. 2001/107,720. (In Japanese)

Economies of scale and scope describe key characteristics of production cost functions that influence allocations and prices on procurement markets. Combinatorial auctions have been analyzed intensively, and enable the bidders to express economies of scope, but they typically are designed for single units of each item only and cannot easily be extended to the multi-unit case. Auction designs for markets with economies of scale are much less well understood, they require new bidding languages, and the supplier selection typically becomes a hard computational problem. We suggest a bidding language allowing to describe economies of scope and scale. It enables bidders to specify supply curves, representing economies of scale, and various rebates accounting for economies of scope. In addition, we support a number of side constraints enabling the auctioneer to consider various business rules in the winner determination. We conduct computational experiments based on a branch-and-cut solver to explore the incremental computational burden to determine optimal solutions brought about by the need to express economies of scope for problems of practical size.

BackgroundPublicly funded biomedical and health research is expected to achieve the best return possible for taxpayers and for society generally. It is therefore important to know whether such research is more productive if concentrated into a small number of ‘research groups’ or dispersed across many.MethodsWe undertook a systematic rapid evidence assessment focused on the research question: do economies of scale and scope exist in biomedical and health research? In other words, is that research more productive per unit of cost if more of it, or a wider variety of it, is done in one location? We reviewed English language literature without date restriction to the end of 2014. To help us to classify and understand that literature, we first undertook a review of econometric literature discussing models for analysing economies of scale and/or scope in research generally (not limited to biomedical and health research).ResultsWe found a large and disparate literature. We reviewed 60 empirical studies of (dis-)economies of scale and/or scope in biomedical and health research, or in categories of research including or overlapping with biomedical and health research. This literature is varied in methods and findings. At the level of universities or research institutes, studies more often point to positive economies of scale than to diseconomies of scale or constant returns to scale in biomedical and health research. However, all three findings exist in the literature, along with inverse U-shaped relationships. At the level of individual research units, laboratories or projects, the numbers of studies are smaller and evidence is mixed. Concerning economies of scope, the literature more often suggests positive economies of scope than diseconomies, but the picture is again mixed. The effect of varying the scope of activities by a research group was less often reported than the effect of scale and the results were more mixed.ConclusionsThe absence of predominant findings for or against the existence of economies of scale or scope implies a continuing need for case by case decisions when distributing research funding, rather than a general policy either to concentrate funding in a few centres or to disperse it across many.

Impact of horizontal mergers on supply chain performance: The case of the upstream oil and gas industry

This study investigates economies of scale, cost complementarity and economies of scope for healthcare organizations using econometric approaches. The economies of scale appear to exist in each service provided by a hospital such as inpatient treatment services, outpatient treatment services, and other patient treatment services, respectively. When we test all services in aggregate level, it also indicates that the healthcare industry on average exhibits the economies of scale of 6 percent, which implies that scaling up hospital sizes will bring substantial cost savings to them Evidence shows that cost complementarity exists between outpatient services and other services for patients and, i.e., these other services for patients experience the reduction in marginal costs as the outputs of the outpatient services increase. For the economies of scope, they are present in most service areas; aggregate level services, outpatient services, and other services for patients, respectively. Inpatient treatment services, however, do not show any evidence of the economies of scope. Results show that the economies of scope are achieved by the general hospital type that provides all service areas such as inpatient treatments, outpatient treatments, and other services for patients. The existence of the economies of scope provides the rationale for extending the existing line of business in a hospital into more diverse areas of services where its benefit comes in the form of cost savings. In sum, it overall provides evidence that the M&As in this industry are encouraged to achieve cost reductions from the economies of scale and scope by changing the size and the output mix.

In this study a parametric approach employing a flexible translog functional model is used to estimate economies of scale and scope in the four major Australian banks (ANZ, NAB, CBA and WESTPAC). Two hypotheses are tested to determine whether bank economies of scale have changed and also whether economies of scope were exhausted following financial deregulation. The analysis reveals that there is evidence for a continuing difference in banks' economies of scale as a result of deregulation. The empirical evidence also suggests that economies of scope were not exhausted by financial deregulation. In addition, there is continuing evidence of considerable economies of scope in the four major banks. In other words, Australian banks have not fully embraced deregulation and adjusted their joint production in a cost efficient manner. Findings in this study indicate that further deregulation would create a more competitive and efficient banking environment in Australia.

Recently, Murray and White (1983) have analyzed economies of scale (economies of production due to output expansion) and economies of scope (economies due to joint production of output) for credit unions of British Columbia by explicitly recognizing the multiproduct nature of the credit union. Unfortunately, their analysis of scale and scope economies is limited in view of recent advances in the theory of the multiproduct firm. For example, in multiproduct firms, there exist two economies of scale: economies arising from overall production activity and economies arising from the production of a particular product or a product set. Estimates of scale economies obtained by Murray and White (hereafter, MW) are overall scale economies, but no discussion of product-specific scale economies is provided in their analysis. Further, MW employ the cost complementarity concept as a measure of economies of scope. However, cost complementarity is a local not global test for the existence of economies of scope. In addition, it is necessary to distinguish overall scope economies from product-specific scope economies. This paper reexamines the issue of economies of scale and scope in credit unions, extending the model developed by MW and providing some new empirical evidence. Section 1 extends the model developed by MW to reexamine the issue of scale and scope in multiproduct credit unions. Section 2 contains a description of empirical results. Section 3 completes the paper with a conclusion.

Generally, empirical studies have used either duality theory with the estimation of cost functions or nonparametric estimation methods to assess efficiency in the financial services industry. The purpose of the present study is to estimate economies of scope and scale in agricultural banking. This will be accomplished through estimation of an indirect multi-product cost function. The uniqueness of this study, when compared to previous studies of efficiency of the financial services industry, is the disaggregation of the outputs so that agricultural lending can be evaluated. In addition, a normalized quadratic cost function is estimated with curvature properties imposed. Clark reviewed thirteen studies that measured economies of scope and scale for commercial banks, credit unions, and savings and loan associations. He found that they offered four broad conclusions: (a) overall economies of scale exist at low levels of input, (b) no consistent evid nce of economies of scope exists, (c) some evidence of cost complementarities exists, and (d) the results seem to be robust among financial institutions.

This paper researches the existence of economies of scale and scope in the Chilean water and sewerage industry using a translog cost function approach over the period 2010-2017. It also provides estimates of productivity growth and its determinants, technical change and scale effect. The results suggest that on average, the water industry operates under increasing economies of scale, which implies that further increases in water companies' scale of operations may be cost beneficial. Economies of scope between water and sewerage services were found for the average company, which suggests that the joint provision of these services may lead to cost savings. An average annual productivity increase of 2.5% was reported with scale effect being the major driver. Full private companies performed better than concessionary and public water companies. The results of our study can be of greater interest to the policy-makers who want to make decisions on introducing policy reforms such as mergers, unbundling of the water and sewerage supply chain, or developing incentives to improve companies' productivity.

Economies of Scale and Scope in the European Banking Sector 2002-2011