An Output Orientated Non Parametric Measure of Economies of Scope

Economies of scope are present when producing jointly a diversified basket of goods and services is less costly than their separate production. Data Envelopment Analysis (DEA) can estimate economies of scope by the difference between input requirement sets of diversified and specialized firms and are applicable only when both specialized and diversified firms are present in the sample. We develop a measure of economies of scope to an output orientated DEA model even when the sample comprises only diversified firms, to obtain radial estimation of economies of scope. Our method puts in evidence that economies of scope are influenced by scale inefficiencies, and if these inefficiencies are left aside, diseconomies of scope are impossible.