decreasing returns to scale


A property of a production function such that changing all inputs by the same proportion changes output less than in proportion. Example: a function homogeneous of degree less than one. Also called simplydecreasing returns. Not to be confused with diminishing returns, which refers to increasing some inputs while holding other inputs fixed. Contrasts with increasing returns and constant returns.

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The decreasing returns to scale was something really interesting to me and I liked what it was all about and what it meant.

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You should try and make sure that you know a good way to understand how the decreasing returns to scale may affect your product.

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We build a model of optimal design of managerial incentive schemes when the production technology exhibits decreasing returns to scale and firms compete ï la Cournot. We borrow Fershtman and Judd (1987) and Krïkel (2005) framework. We show how there is a dominant strategy for entrepreneurs to delegate output decisions.

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