Economies of scale and regional services

Publication Type:
Information Sheet

Publication Subject(s):

ISBN:
978-1-925701-81-4

ISSN:
1440-9593

Release Date:
March 2019

Economies of scale are a common feature of the cost structure of service providers. This paper discussed how economies of scale incentivise the geographic centralisation of services because they make it cheaper to supply services from fewer centralised locations. The paper also articulates the trade-off between centralising to gain the benefits from economies of scale and the costs of centralisation. These costs include extra transport costs for people who access the services and the costs to society from people not using the services due to difficulty accessing them. This creates a tension between the benefits from economies of scale and the benefits from having more geographically dispersed services.

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