Economies of scope are "efficiencies formed by variety, not volume" (the latter concept is "economies of scale"). In the field of economics, "economies" is synonymous with cost savings and "scope" is synonymous with broadening production/services through diversified products. Economies of scope is an economic theory stating that average total cost (ATC) of production decrease as a result of increasing the number of different goods produced. For example, a gas station primarily sells gasoline, but can sell soda, milk, baked goods, etc. and thus achieve economies of scope since with the same facility, each new product attracts new dollars a customer would have spent elsewhere. The business historian Alfred Chandler argued that economies of scope contributed to the rise of American business corporations during the 20th century.

The term and the development of the concept are attributed to economists John C. Panzar and Robert D. Willig (1977, 1981). Their 1981 article notes that they had coined the term several years previously, and felt that its logic was "intuitively appealing".

Whereas economies of scale for a firm involve reductions in the average cost (cost per unit) arising from increasing the scale of production for a single product type, economies of scope involve lowering average cost by producing more types of products. Hofstrand notes that the two types of economy "are not mutually exclusive".

Economies of scope make product diversification efficient, as part of the Ansoff Matrix, if they are based on the common and recurrent use of proprietary know-how or on an indivisible physical asset. For example, as the number of products promoted is increased, more people can be reached per unit of money spent. At some point, however, additional advertising expenditure on new products may become less effective (an example of the opposite effect, diseconomies of scope). Related examples include distribution of different types of products, product bundling, product lining, and family branding.

Economies of scope exist whenever the total cost of producing two different products or services (X and Y) is lower when a single firm instead of two separate firms produces by themselves.

The degree of economies of scope (DSC) formula is as follows:

If ${\displaystyle DSC>0}$, there are economies of scope. It is recommended that two firms cooperate, or systems merge, to produce together.

If ${\displaystyle DSC=0}$, there are no economies of scale nor economies of scope.