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Macroeconomics Commons

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Industrial Organization

Competitive allocation of resources

Cornell University Law School

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Full-Text Articles in Macroeconomics

External Economies And Competitive Equilibrium, George A. Hay, John J. Mcgowan Nov 1972

External Economies And Competitive Equilibrium, George A. Hay, John J. Mcgowan

Cornell Law Faculty Publications

In an article published in 1955, Murray Kemp analyzed the case for interference with the competitive allocation of resources when external economies of production are present. In the specific model we are interested in—where the costs of any one producer's operations are affected by the total output of all producers of the same product—Kemp attempted to show that where entry into the industry is closed (although the industry is otherwise perfectly competitive), "there can always be found a subsidy, either on the product or on a particular factor, which will be a sufficient incentive to firms to ...