Why do firms produce multiple outputs?

Abstract

This paper demonstrates that there are at least three distinct explanations: economies of scope, essential jointness and uncertainty. It also demonstrates that economies of scope may be due to output interactions as well as to sharable inputs and the cost and profit function as usually defined are not the true profit-maximizing functions. The supply of inputs and sale of outputs in one production process are organised among several firms and/or plants in order to minimise aggregate production and transaction costs. © 1983.