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.
American Economic Association Characteristics Consumer choice Econometric society Johnson, H. G Lancaster, K. J Monopolistic competition New trade theory Pareto efficiency Product differentiation Scale economies
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