The Size Conundrum: Why Online Knowledge Markets Can Fail at Scale

In this paper, we interpret the community question answering websites on the StackExchange platform as knowledge markets, and analyze how and why these markets can fail at scale. A knowledge market framing allows site operators to reason about market failures, and to design policies to prevent them. Our goal is to provide insights on large-scale knowledge market failures through an interpretable model. We explore a set of interpretable economic production models on a large empirical dataset to analyze the dynamics of content generation in knowledge markets. Amongst these, the Cobb-Douglas model best explains empirical data and provides an intuitive explanation for content generation through concepts of elasticity and diminishing returns. Content generation depends on user participation and also on how specific types of content (e.g. answers) depends on other types (e.g. questions). We show that these factors of content generation have constant elasticity---a percentage increase in any of the inputs leads to a constant percentage increase in the output. Furthermore, markets exhibit diminishing returns---the marginal output decreases as the input is incrementally increased. Knowledge markets also vary on their returns to scale---the increase in output resulting from a proportionate increase in all inputs. Importantly, many knowledge markets exhibit diseconomies of scale---measures of market health (e.g., the percentage of questions with an accepted answer) decrease as a function of number of participants. The implications of our work are two-fold: site operators ought to design incentives as a function of system size (number of participants); the market lens should shed insight into complex dependencies amongst different content types and participant actions in general social networks.Comment: The 27th International Conference on World Wide Web (WWW), 201

Cost efficiency and UK building societies. An econometric panel-data study employing a flexible fourier functional form

The paper empirically quantifies firm specific 'distribution free' cost efficiency, economies of scale and economies of scope in the UK building society sector between 1990-1995. Both a flexible Fourier and a translog functional form are employed with an intermediation representation of depository institution production. Differences in the performance of these two functional forms are found. A broad distribution of cost efficiency over the sample period is observed, with a mean efficiency of 76 per cent estimated using the flexible Fourier form and a mean efficiency of 72.52 per cent estimated employing the translog form. Distinct results for economies of scale are produced with the two models

Testing for Economies of Scope in European Railways: An Efficiency Analysis

In this paper, we conduct a pan-European effciency analysis to investigate the performance of European railways with a particular focus on economies of vertical integration. We test the hypothesis that integrated railways realize economies of scope and, thus, produce railway services with a higher level of effciency. To determine whether joint or separate production is more effcient, we apply a Data Envelopment Analysis super-effciency bootstrapping model which relates the ef- ficiency for integrated production to a reference set consisting of separated firms which use a dierent production technology. We find that for a majority of European railways economies of scope exist.Efficiency, Vertical Integraton, Railway Industry

Bureaucratic limits of firm size: Academic summary

The research tests Oliver Williamson’s proposition that transaction cost economics can explain the limits of firm size. Williamson suggests that diseconomies of scale are manifested through four interrelated factors: atmospheric consequences due to specialisation, bureaucratic insularity, incentive limits of the employment relation and communication distortion due to bounded rationality. Furthermore, Williamson argues that diseconomies of scale are counteracted by economies of scale and can be moderated by adoption of the multidivisional organisation form and by high internal asset specificity. Combined, these influences tend to cancel out and thus there is not a strong, directly observable, relationship between a large firm’s size and performance. A review of the relevant literature, including transaction cost economics, sociological studies of bureaucracy, information-processing perspectives on the firm, agency theory, and studies of incentives and motivation within firms, as well as empirical studies of trends in firm size and industry concentration, corroborates Williamson’s theoretical framework and translates it into five hypotheses: (1) Bureaucratic failure, in the form of atmospheric consequences, bureaucratic insularity, incentive limits and communication distortion, increases with firm size; (2) Large firms exhibit economies of scale; (3) Diseconomies of scale from bureaucratic failure have a negative impact on firm performance; (4) Economies of scale increase the relative profitability of large firms over smaller firms; and (5) Diseconomies of scale are moderated by two transaction cost-related factors: organisation form and asset specificity. The hypotheses are tested by applying structural equation models to primary and secondary cross-sectional data from 784 large U.S. manufacturing firms. The statistical analyses confirm the hypotheses. Thus, diseconomies of scale influence the growth and profitability of firms negatively, while economies of scale and the moderating factors have positive influences. This implies that executives and directors of large firms should pay attention to bureaucratic failure.bureaucratic failure, diseconomies of scale, transaction cost economics

An Estimation of the Efficient Size of Sugarcane Enterprises for Farmers in Trinidad

This research paper provides an estimation of the efficient size of operation for sugarcane farmers in Trinidad. The estimates were based on a sample of two hundred and twenty-seven farmers selected from a cost of sugarcane production survey. To identify the efficient size of operation the ordinary least square estimation technique was used. The identification of the efficient size of operation allowed a test of the hypothesis that the minimum point on the long run average cost curve was significantly greater than the average enterprise size of six acres. The long run total cost curve was estimated and the cubic functional form provided the best fit based on both the adjusted R2 and the result from the Wald test. The results of the estimation process indicated that the optimal size was 32 acres of sugarcane and that 98% of the farmers operated at less than this size.Cost function, cost elasticity, efficient size, sugar-cane, Trinidad, Agribusiness, Farm Management, Research Methods/ Statistical Methods,

The Size and Service Offering Efficiencies of U.S. Hospitals.

Hospital productivity has been a research topic for over two decades. We expand on this research to include measures of dis/economies of scope. By using the Free Coordination Hull (FCH) we are able to determine if hospitals in our sample can become more efficient if they provide more services (diseconomies of scope) or if two smaller hospitals with a reallocation of resources could become more efficient (economies of scope). Using data from the American Hospital Association for the years 2004-2007, we found variations among hospital markets (measured by the Core Based Statistical Area). We can determine whether dis/economies of scope exist by comparing the results from two linear programming problems. Focusing on four markets: Los Angeles, Philadelphia, Madison, WI, and New Orleans we found variations in how best these hospitals operating in these markets could change in order to increase both scale and scope efficiencies. This approach could be used by policy makers and managers in order to reduce costs by sharing, reducing, or expanding services in hospitals. Findings from a study such as this should aid reform programs by providing more information on the sources of hospital inefficiency.Hospital, Efficiency, Economies of Scope, Hospital Markets

Economies of Scope in European Railways: An Efficiency Analysis

In the course of railway reforms at the end of the last century, European na- tional governments, as well the EU Commission, decided to open markets and to separate railway networks from train operations. Vertically integrated railway com- panies argue that such a separation of infrastructure and operations would diminish the advantages of vertical integration and would therefore not be suitable to raise economic welfare. In this paper, we conduct a pan-European analysis to investi- gate the performance of European railways with a particular focus on economies of scope associated with vertical integration. We test the hypothesis that integrated railways realize economies of joint production and, thus, produce railway services on a higher level of efficiency. To determine whether joint or separate production is more efficient we apply an innovative Data Envelopment Analysis super-efficiency bootstrapping model which relates the efficiency for integrated production to a vir- tual reference set consisting of the separated production technology and which is applicable to other network industries as energy and telecommunication as well. Our findings are that for a majority of European Railway companies economies of scope exist.Efficiency, Vertical Integration, Railway Industry

Will Women Save more than Men? A Theoretical Model of Savings and Marriage

This paper presents an inter-temporal model of individual behavior with uncertainty about marriage and divorce and which accommodates the possible presence of economies or diseconomies of scale from marriage. We show that a scenario of higher marriage rates and higher divorce rates will be associated with higher savings rates in the presence of economies of marriage and with lower savings rates in the presence of diseconomies of marriage. In the context of traditional gender roles, this implies higher saving rates by young men and lower saving rates by young women than in less traditional countries, the opposite being the case with saving rates of married women relative to those of married men. We establish the relevance of traditional gender roles and marital status to understanding cross-country variation in gender differentials in savings behavior.savings behavior, marriage, divorce, economics of marriage, gender roles

Towards a more appropriate method for determining the optimal scale of production units

In this paper the overall diseconomies experienced beyond certain production unit scale thresholds are investigated. These are due to several costs, including those relating to the consumption of non- renewable resources, which firms have generally not internalised, to the extent that they can operate far beyond the socially optimal scale. Economic instruments such as environmental taxes may induce a shift towards marginally more sustainable production levels for a plant of a given size, but they are not designed to affect the plant size itself. This paper suggests a method for determining a socially optimal scale, by focussing on the factors which determine optimality. The results of applying this method show that establishing the scale of production units at a social optimum rather than a private one implies a significant decrease in scale for most economic activities. Downscaling has significant economic welfare and environmental advantages. Incentives linked to the factors which determine the social optimum are put forward as measures for inducing a shift towards an optimal size for production units.optimal scale, sustainable production, market areas