Study on Diseconomies of Scale of Retail Firms

The scale diseconomies effect of the expansion activities of China's retail firms is studied.Based on a panel data set made up of 182 firms in a 5-year period,Mundlak Mean Regression and DEA-Malmquist Index are used to analyze the status of scale diseconomies effect and its variation tendency.The result shows that,generally speaking,the firms are suffering from diseconomies of scale.Specifically,professional retailing has a more severe problem than general retailing.Since retailers offer service products,which is different from manufacturers,they face special constrains when trying to achieve economy of scale.Given the demand volume and its structure,expansion activity will enhance the competition in the business circle,thus affect its selling and service providing activity,and finally causes diseconomies of scale.