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ARE SCALE ECONOMIES IN BANKING ELUSIVE OR ILLUSIVE? EVIDENCE OBTAINED BY INCORPORATING CAPITAL STRUCTURE AND RISK-TAKING INTO MODELS OF BANK PRODUCTION* Joseph P. Hughes Department of Economics, Rutgers

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What are scale economies in?

Scale economies refer to the cost advantages that a company can achieve when it produces and operates on a larger scale. It allows companies to decrease their per-unit costs as they increase their production. This can result in higher profit margins and a competitive advantage.

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The purpose of studying scale economies is to understand the cost structure and competitive dynamics of industries. It helps businesses make informed decisions regarding production levels, pricing strategies, and market competition. Additionally, it assists policymakers in evaluating the efficiency and competitiveness of industries.

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