The theory of the second-best originally proposed by Lipsey and Lancaster is surveyed, covering the original 1957 paper until 1981. General themes covered include the (im)possibility of piecemeal welfare policy, the search for and characterization of, general second-best rules, and the impact on...

This note demonstrates that cost minimization may result in an inefficient allocation of resource if there are multiple techniques of production and one or more techniques exhibit increasing returns to scale. This result is true even if all output are priced at marginal cost. The nature of this...

This paper examines the role a government firm can play in coordinating the capacity investment decisions of firms in an oligopoly. If the government firm can monitor the investment decisions of private firms there exists a reaction function for the government, giving its own investment as a...

This paper considers two resource allocation mechanisms which operated in an ex ante exchange environment and have the properties that: 1) equilibrium allocations are ex post efficient; 2) ex post efficient allocations can be attained as equilibrium of the mechanisms. With the possibility of...

This paper reviews Guesnerie's analysis that proved the marginal cost pricing doctrine was valid for firms with production sets which are convex and allow for certain types of non-convexities. We demonstrate the validity of his conjecture, and develop additional decentralization rules with...

The qualitative restrictions implied by the first-order conditions of the optimal tax problem are generally so weak that little can be said as to what constitutes an optimal set of taxes. It is therefore desirable that one have available a technique for computing optimal taxes in a full general...