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Comparing Optima: Do Simplifying Assumptions Affect Conclusions?

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  • Milgrom, Paul

Abstract

Consider a family of maximization models in which the optimum trades off beneficial and costly effects. Then comparative statics derived under many kinds of simplifying assumptions about the benefits technology are also true for general (convex and nonconvex) technologies. For example, any comparative statics conclusion about investment by a risk-averse decisionmaker under uncertainty that holds when expected returns are described by a general linear function also holds for an arbitrary nonlinear expected return function. Copyright 1994 by University of Chicago Press.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 102 (1994)
Issue (Month): 3 (June)
Pages: 607-15

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Handle: RePEc:ucp:jpolec:v:102:y:1994:i:3:p:607-15

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Cited by:
  1. Jose E. Quintero Jaramillo, 2004. "Liquidity Constraints And Credit Subsidies In Auctions," Business Economics Working Papers wb040604, Universidad Carlos III, Departamento de Economía de la Empresa.
  2. J-F. Laslier & A. Trannoy & K. Van Der Straeten, 2000. "Voting Under Ignorance of Job Skills of Unemployed : The Overtaxation bias," THEMA Working Papers 2000-38, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  3. Hermelingmeier, Christian, 2010. "The competitive firm and the role of information about uncertain factor prices," Economic Modelling, Elsevier, vol. 27(2), pages 547-552, March.
  4. Raju, Jagmohan S., 1995. "Theoretical models of sales promotions: Contributions, limitations, and a future research agenda," European Journal of Operational Research, Elsevier, vol. 85(1), pages 1-17, August.
  5. Francisco Martínez Mora & M. Socorro Puy, 2010. "Off-the-peak preferences over government size," Working Papers 2010-05, FEDEA.
  6. John Quiggin & Robert G. Chambers, 2003. "Comparative statics for state-contingent technologies," Risk & Uncertainty Working Papers WPR03_5, Risk and Sustainable Management Group, University of Queensland.
  7. Xu, Su Xiu & Lu, Qiang & Huang, George Q. & Zhang, Ting, 2013. "Scope economies, market information, and make-or-buy decision under asymmetric information," International Journal of Production Economics, Elsevier, vol. 145(1), pages 339-348.
  8. Chambers, Robert G & Quiggin, John, 2006. "Dual approaches to the analysis of risk aversion," Risk and Sustainable Management Group Working Papers 151175, University of Queensland, School of Economics.
  9. Quiggin, John & Chambers, Robert G, 2004. "Supermodularity and the comparative statics of risk," Risk and Sustainable Management Group Working Papers 151164, University of Queensland, School of Economics.
  10. Gans, Joshua S. & Smart, Michael, 1996. "Majority voting with single-crossing preferences," Journal of Public Economics, Elsevier, vol. 59(2), pages 219-237, February.
  11. Edlin, Aaron S. & Shannon, Chris, 1998. "Strict Monotonicity in Comparative Statics," Journal of Economic Theory, Elsevier, vol. 81(1), pages 201-219, July.
  12. Hamister, James W. & Suresh, Nallan C., 2008. "The impact of pricing policy on sales variability in a supermarket retail context," International Journal of Production Economics, Elsevier, vol. 111(2), pages 441-455, February.
  13. Milgrom, Paul & Strulovici, Bruno, 2009. "Substitute goods, auctions, and equilibrium," Journal of Economic Theory, Elsevier, vol. 144(1), pages 212-247, January.
  14. Esther Gal-Or & Anindya Ghose, 2005. "The Economic Incentives for Sharing Security Information," Industrial Organization 0503004, EconWPA.

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