1. Economies of scale in innovations with block-busters
- Author
-
Didier Sornette
- Subjects
Quantitative theory ,Financial economics ,Economies of agglomeration ,Stochastic game ,Econometrics ,Structure (category theory) ,Economics ,General Economics, Econometrics and Finance ,Power law ,Finance ,Block (data storage) ,Economies of scale - Abstract
Are large-scale research programmes that include many projects more productive than smaller ones with fewer projects? This problem of economies of scale is relevant for understanding recent mergers, in particular in the pharmaceutical industry. We present a quantitative theory based on the characterization of distributions of discounted sales S resulting from new innovations. Assuming that these complementary cumulative distributions have fat tails with approximate power law structure S −α, we demonstrate that economies of scales are realized if and only if α
- Published
- 2002
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