The Cost of Scale Inefficiency In The Canadian Brewing Industry: A Multi-Product Cost Function Approach

Abstract

The study examines economies of scale for the Canadian beer industry using multi-product cost functions using micro data. The results reflect the effects of product mix, industry regulation, and interprovincial trade prohibitions. With the present mix of products 10 plants could supply the needed quantity of beer at less expense than the current configuration of 25 plants. The cost of regulation is estimated to be approximately 6.5% above the optimal plant cost.