Abstract
Kelvin Lancaster made at least three major original contributions to economic theory. The first, together with Richard G. Lipsey, is ‘The General Theory of the Second Best’ in the area of welfare economics. The other was his ‘characteristics’ approach to the pure theory of consumer behaviour. The third, based on this new approach to consumer behavior was a solution to the problem of ‘socially optimal product differentiation’, which showed how to balance the consumer’s desire for more variety in the choice of goods to consume against economies of scale in the production of each good.
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Bibliography
Dixit, A., and J. Stiglitz. 1977. Monopolistic competition and optimum product variety. American Economic Review 67: 297–308.
Krugman, P. 1979. Increasing returns, monopolistic competition and international trade. Journal of International Economics 9: 858–864.
Krugman, P. 1980. Scale economies, product differentiation and the pattern of trade. American Economic Review 70: 151–175.
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Findlay, R. (2018). Lancaster, Kelvin John (1924–1999). In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2726
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DOI: https://doi.org/10.1057/978-1-349-95189-5_2726
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