The Dichotomy between Production and Consumption Decisions and Economic Efficiency

Mei Wen

Abstract
This paper examines possible changes in some central economic propositions due to the dichotomy between production decision and consumption decision. It finds that with economies of specialization and transaction costs, this dichotomy may imply sub-optimal decisions. Meanwhile, even without the dichotomy, the existence of economies of specialization and transaction costs makes the conventional Pareto optimal conditions not hold in general cases.

Keywords: economies of specialization, transaction costs, Pareto optimal conditions.
JEL classification codes : D00, D60, C60, B41.

Download this paper.

Inframarginal Economics Society www.inframarginal.com