Abstract
The second fundamental theorem of welfare economics suggests that our market economy can be inefficient in non-convex environments. Then, what kind of inefficiencies are we facing? Where can we find them? How can we eliminate them? In this paper, a total surplus analysis is used to show that one of the most serious such inefficiencies is “inactive innovation” and it can be eliminated if buyers of an innovative commodity have a sense of “gratitude” and are willing to pay the prices which are the same as their benefit from the commodity.
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