This paper estimates the cost function of the consumer finance company
industry to explore the questions of existence of scale economies and
elasticity of costs by loan size. Using a more appropriate functional
form and much newer data than in earlier studies, this study confirms
their general conclusion that economies of scale in the industry are
limited at the firm level but exist at the office level. scale economi
es are found only at smaller offices, however; and they become exhaust
ed as office size increases. Elasticity of operating costs with respec
t to loan size is shown to be well less than unity.