EFFICIENCY OF THE MULTIPLANT, MULTIPRODUCT FIRM

A general framework is provided for assessing the technology, cost, and efficient scale of a multiplant, multiproduct firm. We show sufficient conditions for the existence of a plant cost function, and necessary and sufficient conditions for using plant-level data to draw exact firm-level cost inferences. We also distinguish between plant and input nonjointness and show the optimal relation between plant-level and firm-level cost elasticity in a multiproduct setting. The framework is applied to a vegetable processing cooperative, which is found to operate below its efficient scale.