Journal article
An Examination of Cost Subadditivity and Multiproduct Production in Large U.S. Banks
Journal of money, credit and banking, Vol.22(4), pp.504-525
11/01/1990
DOI: 10.2307/1992434
Abstract
A multiproduct cost function and the intermediation approach to analyzing bank production are used to thoroughly examine the subadditivity of costs in a sample of 311 of the 400 largest commercial banks in the US. Using a grid approach that imposes product mix constraints consistent with those observed among the sample firms, bank-output/product-mix cost comparisons are obtained that are more realistic than those typically found in the literature. By applying the methodology to a sample of larger banks, novel results are obtained on the nature of the cost functions of these large banks. The results imply that the cost functions of these large multiproduct banks are not subadditive and thus that there are not measurable cost complementarities in multiproduct production among these types of banks. This does not necessarily mean, however, that these banks would be better off breaking up production into a group of specialty firms.
Details
- Title: Subtitle
- An Examination of Cost Subadditivity and Multiproduct Production in Large U.S. Banks
- Creators
- William HunterStephen TimmeWon Yang
- Resource Type
- Journal article
- Publication Details
- Journal of money, credit and banking, Vol.22(4), pp.504-525
- DOI
- 10.2307/1992434
- ISSN
- 0022-2879
- eISSN
- 1538-4616
- Publisher
- Ohio State University Press; COLUMBUS
- Language
- English
- Date published
- 11/01/1990
- Academic Unit
- Finance
- Record Identifier
- 9984963230102771
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