Modelling cost complementarities in terms of joint production

Cost complementarities arise from synergies in the production of heterogeneous goods. It is shown that synergies can be accounted for in terms of shared public inputs (roughly) if and only if synergies decrease as the scope of production increases. This case of ‘‘substitutive’’ synergies is argued to be typical. The key technical tool is a novel interpretation of conjugate Moebius inversion in terms of higher-order differences. r 2003 Elsevier Inc. All rights reserved. JEL classification: D24; L23