Density advantage
As density advantage ( English economies of density ) in the are production theory of microeconomics falling unit costs due to a relative concentration of buyers and / or sellers in one geographical area (see also: Cluster ) refers. Advantages in density occur particularly in those industries in which the supply route plays a major role - be it in terms of costs , delivery speed or other factors.
Examples
Density advantages are significant, for example, in the delivery of letters. For every postal delivery company or every parcel delivery company, it is an advantage to be able to deliver to several customers within one street. Smaller providers who only have one or a few customers on the same street have to cover almost the same transport route as a provider who can deliver to many customers on one tour.
The same applies to other industries: A private motorway operator has advantages in terms of density due to a higher volume of traffic.
Demarcation
Density advantages can occur both as a sub-case of economies of scale and as a sub-case of composite effects. This can be easily illustrated using the example above: A density advantage in the form of economies of scale occurs when the delivery company can acquire more customers on a street.
A density advantage as an advantage of scope can be observed when the delivery company delivers letters to individual residents of the street and parcels to other residents.
Economies of scale and economies of scale can also occur without density advantages - for example when the delivery company serves new districts.