Allocable Fixed Inputs as a Cause of Joint Production: A Cost Function Approach

Abstract

Abstract The multiproduct cost concepts of Baumol, Panzar, and Willig are used to explore the contention of Shumway, Pope, and Nash that allocable fixed inputs cause joint production. Allocable fixed inputs may create an interdependence in the short‐run cost function when none exists in the long run; however, this will not necessarily lead to joint production. For joint production to occur in the short run, either the short‐run cost function must exhibit economies of scope, or stand‐alone production of one of the commodities must exhibit diseconomies of size. The issue of whether allocable fixed inputs cause joint production is an empirical question.

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