Diversified Firms Unlock Massive Cost Savings Through Economies of Scale
Economies of scope happen when making a variety of things together is cheaper than making them separately. A new method was created to measure economies of scope in a way that focuses on the output of companies. This method can be used even if only companies making a variety of things are studied. The study found that economies of scope are affected by how efficiently companies are operating, and if these inefficiencies are ignored, it's impossible to have cost savings from making different things together.