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The Cost Structure of the Consumer Finance Industry

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Abstract

This paper estimates the cost function of the consumer finance company industry to explore the questions of existence of scale economies and elasticity of costs by loan size. Using a more appropriate functional form and much newer data than in earlier studies, this study confirms their general conclusion that economies of scale in the industry are limited at the firm level but exist at the office level. Scale economies are found only at smaller offices, however; and they become exhausted as office size increases. Elasticity of operating costs with respect to loan size is shown to be well less than unity.

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Authors and Affiliations

  1. Board of Governors Federal Reserve System, USA

    Thomas A. Durkin & Gregory E. Elliehausen

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  1. Thomas A. Durkin
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  2. Gregory E. Elliehausen
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Durkin, T.A., Elliehausen, G.E. The Cost Structure of the Consumer Finance Industry. Journal of Financial Services Research 13, 71–86 (1998). https://doi.org/10.1023/A:1007906527814

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