Economies of scope between two productive activities exist where a single firm can carry out activities at lower costs than two independent firms (Panzar and Willig 1980. Such economies of scope, sometimes called synergies, form the economic justification for the existence of diversified firms. Neoclassical economists found economies of scope difficult to explain in the following sense: suppose two products are produced at a lower cost on a single machine rather than on two machines. This condition alone does not necessarily lead to multiproduct firms because the owner could lease part of the machine time to another single-product firm, thus reaping the efficiency benefit while avoiding the organization of a two-product firm.