The Homogenization of Heterogenous Inputs.

This article examines the allocative effects of institutional constraints that require purchasers to treat heterogeneous inputs as homogeneous for input pricing. The attention of the author was drawn to the problem by a comparative analysis of salary policies in academic institutions, exploration suggests widespread applicability and relevance in such areas as, the differential allocative effects of craft and industrial unionization of the labor force, the allocative effects of equal pay for equal work, and the channelization of profit- or rent-seeking activities, and the subsequent processes through which profits or rents are dissipated. Orthodox price theory contains a well-developed analysis for the pricing of homogeneous inputs. In the models of rising supply price under competition, individual firms face parametric input prices defined bundles of separately considered homogeneous input units.