Diversification, Diseconomies of Scope, and Vertical Contracting: Evidence from the Taxicab Industry

  title={Diversification, Diseconomies of Scope, and Vertical Contracting: Evidence from the Taxicab Industry},
  author={Evan Rawley and Timothy S. Simcoe},
  journal={Management Science},
This paper studies how firms reorganize following diversification, proposing that firms use outsourcing, or vertical disintegration, to manage diseconomies of scope. We also consider the origins of scope diseconomies, showing how different underlying mechanisms generate contrasting predictions about the link between within-firm task heterogeneity and the incentive to outsource following diversification. We test these propositions using microdata on taxicab and limousine fleets from the Economic… CONTINUE READING
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