Title

The Allocation of Resources in the Presence of Indivisibilities

Document Type

Discussion Paper

Publication Date

1-1-1994

CFDP Number

1068

CFDP Pages

22

Abstract

The pricing tests for optimality in a convex programming problem are not available when the production possibility set displays economies of scale. The paper argues that indivisibilities in production are one of the major causes of such economies. The constrained optimization problems arising in the presence of indivisibilities are integer programs, and it is proposed that the unique, minimal quantity tests for such problems may shed some light on the internal organization of a large firm.

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