Multimarket contact, economies of scope, and firm performance

We integrate the efficiency and competitive effects of product-market scope choice into a comprehensive model of economic performance and empirically test the model in the context of the U.S. airline industry. Efficiency is i nfluenced by a firm's scope economies, but the intensity of rivalry is dete rmined by multimarket contact with rivals and their scope economies. The co nfluence of strong scope economies with multimarket contact results in supe rior economic performance. However, strong scope economies may not result i n superior performance if rivals can obtain similar economies in nonoverlap ping markets.