Kweku A. Opoku-Agyemang
Working Paper Class 4
To introduce a novel generalization of economies of scope for app marketplaces and virtual reality and other platforms, the paper develops a theory of average cost reductions based on enabling products to have multiple features or functions. The process is labelled economies of score: economies of scope in multi-feature production, based on a simple generalization of the binomial theorem. Synergies or complementarities between features reduce the cost. We show that this definition captures the net effect of adding more features to a platform on its total cost and average cost per feature. We also derive some regularity conditions on the technology set that ensure the existence and uniqueness of our measure of economies of scope. Furthermore, we analyze the profitability of marginal cost pricing.
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Opoku-Agyemang, Kweku A. (2023). "Economies of Score: Scope Economies from Platform Feature Complementarities." Machine Learning X Doing Working Paper Class 4. Machine Learning X Doing.
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