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Theory on the Functions of A Firm: A Resolution to Smith’s Dilemma

Author(s): Zhong-Yuan Han | Shu-Lin Wang

Journal: Journal of Management and Strategy
ISSN 1923-3965

Volume: 3;
Issue: 1;
Date: 2012;
Original page

Based on Stigler’s (1951) conjecture, this article reproves the Smith theorem (the division of labor is limited by the extent of the market), via a framework of perfect competitive market, consequently offering a solution to Smith’s dilemma which usually refers to the incompatibility between the Smith theorem and the theory of competitive price.
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