The Scope and Organization of Production: Firm Dynamics Over the Learning Curve

Matthew Mitchell

RAND Journal of Economics, 2000, vol. 31, issue 1, 180-205

Abstract: I introduce a Bayesian-learning model of the firm to account for a variety of empirical facts about firms. The many tasks the firm can undertake (the scope of the firm) are informationally related, so that the firm can enjoy some economies of scope from information. The model predicts changes in firm size and its comovement with firm scope that are broadly consistent with the empirical evidence. It also provides an explanation for the limits to the scope of the firm: the firm may lack information, or it may be costly to communicate the information necessary to undertake many tasks.

Date: 2000
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