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Literature Review > Economies of Scale and Integration - Pg. 153

Literature Review 153 or Marginal Cost *ð1 Average CostÞ: (5.38) Thus, multiplying Equation (5.37) by C/Y (or Average Cost) yields Marginal Cost, or C/CY QED. MULTIPRODUCT COST FUNCTIONS Distributed electricity as a multiproduct cost industry is well established in the literature, some of which was detailed in Chapter 2 and is expanded here. In addition, the concepts of horizontal (i.e., economies of scope) and vertical inte- gration become more relevant. As such, a brief survey of the literature is included here. LITERATURE REVIEW Economies of Scale and Integration Using a sample of 25 Italian electric utilities, Piacenza and Vannoni (2005) use an integrated approach, which simultaneously considers both horizontal and