The Cost Function and Scale Economies in Academic Research Libraries

Lewis Guodo Liu is an Associate Professor in the Newman Library at the Baruch College of the City University of New York; e-mail: [email protected]. The author would like to thank Dr. Richard E. Quandt, an emeritus professor of economics at Princeton University, and Dr. Robert M. Hayes, an emeritus professor of library and information science at UCLA, for their valuable comments and constructive suggestions on an earlier draft of this article. The author alone is responsible for all possible errors. This empirical research examined scale economies of academic research libraries that belong to the Association of Research Libraries and developed a total cost function for estimating economies of scale. The author argues that libraries in general, and academic research libraries in particular, are information provision organizations that provide multiproducts and multiservices and points out that some previous studies that used the production function have limitations due to the fact that this function only permits a single-output variable. This investigation incorporated a wide range of collections and service output variables into the total cost function. The regression results show that the R square of the cost function model is .8142 and that the coefficients of three very important output variables (volumes held, serials, and group presentations) are statistically significant at high confidence levels. The findings of this research show that the function coefficient is .93, indicating that slight economies of scale exist in academic research libraries.