Abstract
Part of the discussion in this monograph up to here has focussed on analyzing, for given combinations of variability conditions, coordination requirements, and information structure, whether each of the N-tuples of varieties of elementary parts constituting units of, say, an automobile must be wholly produced within a firm or whether the set of elementary parts constituting the automobile can be partitioned into two or more subsets and the varieties of the elementary parts belonging to each of the subsets produced in a different firm.
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Notes
The notion of a product from the consumption point of view may be different from the notion of a product from the production point of view. Something may be a product from the production point of view but not from the consumption point of view and vice versa.
In chapter 6, the main concern was to show how, in the presence of variability the trade off between the increasing coordination costs and decreasing adaptation costs could bring about a limit to the size of the firm, independent of the extent of the market. The result is not changed whether we assume that the same workers can or cannot carry out the coordination and the physical production activity. Therefore the simplifying assumption was justified. In the discussions in this chapter, we need the assumption that different specialists carry out the different activities to facilitate the comparison between resources added to the coordination activity to increase its speed and the savings of resources that it generates.
Panzar and Willig (1981) consider the presence of sharable inputs as a necessary and sufficient condition for the existence of economies of scope (for a different view, see Lloyd, 1983 ). What is implied in Panzar and Willig’s view is that the only source of economies of scope is the presence of sharable inputs. Whether “sharable” input can be defined, and the definition interpreted, in such a way that Panzar and Willig’s view stated in the previous sentences of this paragraph is correct, I do not know. In any case, it is not important for the discussion in this monograph.
The reader may refer to chapter 6 to see the role of indivisibility regarding coordination activity considered in chapter 3 in relation to the existence of an upper limit for the speed of coordination. The indivisibility associated with the production of elementary parts, on the other hand, determines an upper limit to the speed of physical production and to the scale, according to the definitions correspondting to these notions given in this book.
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© 1996 Springer Science+Business Media Dordrecht
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Camacho, A. (1996). Indivisibilities. In: Division of Labor, Variability, Coordination, and the Theory of Firms and Markets. Theory and Decision Library, vol 22. Springer, Dordrecht. https://doi.org/10.1007/978-94-015-8658-0_8
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DOI: https://doi.org/10.1007/978-94-015-8658-0_8
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