In microeconomics, diseconomies of scale are the cost disadvantages that economic actors accrue due to an increase in organizational size or in output, resulting in production of goods and services at increased per-unit costs. The concept of diseconomies of scale is the opposite of economies of scale. In business, diseconomies of scale are the features that lead to an increase in average costs as a business grows beyond a certain size.
Ideally, all employees of a firm would have one-on-one communication with each other so they know exactly what the other workers are doing. A firm with a single worker does not require any communication between employees. A firm with two workers requires one communication channel, directly between those two workers. A firm with three workers requires three communication channels between employees (between employees A & B, B & C, and A & C). Here is a chart of one-on-one communication channels required:
The graph of all one-on-one channels is a complete graph.
The number of one-on-one channels of communication grows more rapidly than the number of workers, thus increasing the time and costs of communication. At some point one-on-one communications between all workers becomes impractical; therefore only certain groups of employees will communicate with one another (e.g. within departments or within geographical locations). This reduces, but does not stop, the increase in unit costs; and also the organisation will incur some inefficiencies due to the reduced level of communication.
An organisation with just one person cannot have any duplication of effort between employees. If there are two employees, there could be some duplication of efforts, but this is likely to be minor, as each of the two will generally know what the other is working on. When organisations grow to thousands of workers, it is inevitable that someone, or even a team, will take on a function that is already being handled by another person or team. In colloquial terms, this is described as "one hand not knowing what the other hand is doing".
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In economics, the concept of returns to scale arises in the context of a firm's production function. It explains the long-run linkage of increase in output (production) relative to associated increases in the inputs (factors of production). In the long run, all factors of production are variable and subject to change in response to a given increase in production scale. In other words, returns to scale analysis is a long-term theory because a company can only change the scale of production in the long run by changing factors of production, such as building new facilities, investing in new machinery, or improving technology.
In economics, diminishing returns are the decrease in marginal (incremental) output of a production process as the amount of a single factor of production is incrementally increased, holding all other factors of production equal (ceteris paribus). The law of diminishing returns (also known as the law of diminishing marginal productivity) states that in productive processes, increasing a factor of production by one unit, while holding all other production factors constant, will at some point return a lower unit of output per incremental unit of input.
The best organic solar cells are limited by bimolecular recombination. Tools to study these losses are available; however, they are only developed for small area (laboratory-scale) devices and are not yet available for large area (production-scale) devices ...
This paper analyzes efficiency and profitability in the Swiss banking sector over the period 1997–2019. We find strong evidence for scale economies: for most banks in the sample, efficiency and profitability increase with bank size. Using an instrumental v ...
2022
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Ethical concerns in the digital domain are growing with the extremely fast evolution of technology and the increasing scale at which software is deployed, potentially affecting our societies globally. It is crucial that engineers evaluate more systematical ...