The long-run cost characteristics of dental practices in the U.S.A

The long-run cost structure of U.S. dental practices is analyzed using data collected in 1977 from a representative sample of U.S. dental practices. The practices were stratified by the number of dentists on staff before sampling. Participation rates by the sampled practices of different sizes were approx. 80% and the response rates for the data collection instruments ranged from 84 to 93%. Empirical results show that linear total and L-shaped average long-run cost curves best explain the cost structure of dental practices, indicating that dental technology exhibits constant returns to scale. Indivisibilities in production may cause firms with extremely small output to experience higher average costs than their larger counterparts. Any economies due to indivisibilities are exhausted at a rather small practice size. There is no evidence that large group practices have a substantial technical advantage over efficient one, two, and three dentist practices.