In economics, economies of scale are "the cost advantages that enterprises obtain due to their scale of operation" (Wikipedia/User:Loraof).

There is a common type of scaling, mostly in services, where the cost input is negligible, but users are in turn expected to use a small amount of the resource compared to the potential maximum they are provided. Good example includes Internet service providers or cloud storage providers, or banking if we go with traditional services. This allows a service provider to manage a small amount of resources which, if everyone utilized the maximum they could at a given time, would make the service or provider collapse.

What is the term, if it exists, for this type of scaling/economics?

  • $\begingroup$ It's not an economic term, but "oversubscription"? $\endgroup$
    – user253751
    Jun 29 '20 at 13:34
  • $\begingroup$ When it comes to banks, the term is “run on the bank” when everyone withdraws at the same time. People use “run on X” in similar contexts. There is a literature on bank runs. $\endgroup$ Jun 29 '20 at 13:49
  • $\begingroup$ @user253751 This is indeed a relevant term, but I think it's mostly a negative word for companies that sell more than they should. I'm wondering if there is a neutral or even positive term for this type of economy or business model (it's not new after all). $\endgroup$
    – Ynhockey
    Jun 29 '20 at 17:54
  • $\begingroup$ @BrianRomanchuk True, but what about the business model itself? Is there a word for that? $\endgroup$
    – Ynhockey
    Jun 29 '20 at 17:55
  • $\begingroup$ You are the only person I am aware of who has ever drawn a link between bank runs - which have been extensively studied - and things like cloud storage services. Although I guess they can be lumped under “oversubscription issues,” I think there’s a huge practical difference between those situations. It is very hard to see why economists would be concerned about hypothetical overruns in cloud storage capacity. $\endgroup$ Jun 29 '20 at 19:40

I think what you are looking for is known as overselling.


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