This is a reference request.

Where can I find an analysis that explains why companies like Microsoft and Amazon don't split into two. At a certain point diseconomies of scale would kick in.

I would like to see an analysis where the economies of scale are compared against the diseconomies of scale and an optimal size is derived that would explain the 144,000 people who work at MS or the 1.3 million that work at Amazon.

Is there an update to the theory of firms that looks at tech companies and their size?

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    $\begingroup$ These are legal entities, not technological plants. $\endgroup$ Commented Jul 18, 2021 at 18:04

1 Answer 1


This is going to be a hard find because it is not true.

These companies have increasing returns to scale over the relevant range and for the foreseeable future. Many technologies, particularly marketing algorithms only get better when servicing larger numbers of people. The introductory/undergraduate literature that should be relevant in these cases is closer to natural monopolies than traditional competitive markets.

West, Joel. "Pioneer advantage under increasing returns to scale: A conceptual framework for information technology industries." American Marketing Association. Conference Proceedings. Vol. 9. American Marketing Association, 1998.

Radner, Roy, and Timothy Van Zandt. "Information processing in firms and returns to scale." The Economics of Informational Decentralization: Complexity, Efficiency, and Stability. Springer, Boston, MA, 1995. 243-280.

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    $\begingroup$ I also want to know why AWS and Amazon delivery are in the same company but I’ll ask that as a different question $\endgroup$
    – jrudd
    Commented Jul 19, 2021 at 15:55
  • $\begingroup$ Very appreciative of the reference $\endgroup$
    – jrudd
    Commented Jul 19, 2021 at 15:56

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