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The Allocation of Resources in the Presence of Indivisibilities

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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.

Suggested Citation

  • Herbert E. Scarf, 1994. "The Allocation of Resources in the Presence of Indivisibilities," Cowles Foundation Discussion Papers 1068, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:1068
    Note: CFP 880.
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    1. László Lovász & Herbert E. Scarf, 1992. "The Generalized Basis Reduction Algorithm," Mathematics of Operations Research, INFORMS, vol. 17(3), pages 751-764, August.
    2. Herbert E. Scarf, 1990. "Mathematical Programming and Economic Theory," Operations Research, INFORMS, vol. 38(3), pages 377-385, June.
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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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