Market Structure and Innovation: A Survey

ECONOMICS, we all recite, deals with allocation of limited resources towards satisfaction of unlimited wants. Resources are typically identified as land, labor, and capital plus a technology that determines their transformation into consumer goods. Disparity between the available goods and services and the desired gives rise to scarcity and the question of what, how, and for whom to produce. The focus then shifts to description and evaluation of alternative resource allocation mechanisms for making the choices. The Pareto criterion, by which an allocation of resources is deemed efficient if any reallocation improving the position of some individual worsens the position of others, is a commonly employed gauge…