Abstract
The focus of this essay is the set of positive propositions that can be obtained when technology exhibits increasing returns to scale. The basic incompatibility of perfect competition and increasing returns to scale is examined separately in a section on existence of equilibria, in which we discuss how one should model economies exhibiting such technologies, i.e. essentially how to modify the Walrasian equilibrium concept in order to guarantee existence of equilibria. Welfare and purely empirical problems are not considered. Definitions: A technology exhibits increasing returns to scale if a proportionate increase in all inputs allows for a more than proportionate increase in outputs; in the single-output case, this implies a decreasing average cost curve.
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Vassilakis, S. (2018). Increasing Returns to Scale. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_746
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DOI: https://doi.org/10.1057/978-1-349-95189-5_746
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