Scale Economies of Retailing at Store Level: Production Function Approach versus Statistical Cost Approach

The purpose of this paper is to test the research proposition that the inconsistent findings existing in the literature on scale economies of retailing at store level are caused by the different approaches adopted. To do this, two approaches, the production function approach and the statistical cost approach, are used to analyze the same set of data. As expected these two methods produced somewhat contradictory results. Modifying the approaches by adding additional variables seems to resolve these contradictions and improve the explanatory power of the models