IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/47080.html
   My bibliography  Save this paper

Exact and Useful Optimization Methods for Microeconomics

Author

Listed:
  • Balder, Erik

Abstract

This paper points out that the treatment of utility maximization in current textbooks on microeconomic theory is deficient in at least three respects: breadth of coverage, completeness-cum-coherence of solution methods and mathematical correctness. Improvements are suggested in the form of a Kuhn-Tucker type theorem that has been customized for microeconomics. To ensure uniqueness of the optimal solution (if applicable), an apparently new adaptation of the notion of strict quasiconcavity is introduced. The role of the domain of differentiability of the utility function is emphasized. This is not only to repair a widespread error in the microeconomic literature but also to point out that this domain can be chosen sensibly in order to include the maximization of certain nondifferentiable utility functions, such as Leontiev utility functions. To underscore the usefulness of the optimality conditions obtained here, five quite different instances of utility maximization are completely solved by a single coherent method.

Suggested Citation

  • Balder, Erik, 2008. "Exact and Useful Optimization Methods for Microeconomics," MPRA Paper 47080, University Library of Munich, Germany, revised 04 Mar 2011.
    • Handle: RePEc:pra:mprapa:47080
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/47080/1/MPRA_paper_47080.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. J. P. Crouzeix, 1980. "Conditions for Convexity of Quasiconvex Functions," Mathematics of Operations Research, INFORMS, vol. 5(1), pages 120-125, February.
    2. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wright, Austin L. & Sonin, Konstantin & Driscoll, Jesse & Wilson, Jarnickae, 2020. "Poverty and economic dislocation reduce compliance with COVID-19 shelter-in-place protocols," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 544-554.
    2. Janvier D. Nkurunziza, 2005. "Reputation and Credit without Collateral in Africa`s Formal Banking," Economics Series Working Papers WPS/2005-02, University of Oxford, Department of Economics.
    3. Vadim Borokhov, 2014. "On the properties of nodal price response matrix in electricity markets," Papers 1404.3678, arXiv.org, revised Jan 2015.
    4. Gan, Li & Ju, Gaosheng & Zhu, Xi, 2015. "Nonparametric estimation of structural labor supply and exact welfare change under nonconvex piecewise-linear budget sets," Journal of Econometrics, Elsevier, vol. 188(2), pages 526-544.
    5. Peterson, Jeffrey M. & Boisvert, Richard N. & de Gorter, Harry, 1999. "Multifunctionality and Optimal Environmental Policies for Agriculture in an Open Economy," Working Papers 127701, Cornell University, Department of Applied Economics and Management.
    6. Aldasoro, Iñaki & Delli Gatti, Domenico & Faia, Ester, 2017. "Bank networks: Contagion, systemic risk and prudential policy," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 164-188.
    7. Gatti, Nicolas & Cecil, Michael & Baylis, Kathy & Estes, Lyndon & Blekking, Jordan & Heckelei, Thomas & Vergopolan, Noemi & Evans, Tom, 2023. "Is closing the agricultural yield gap a “risky” endeavor?," Agricultural Systems, Elsevier, vol. 208(C).
    8. Chorvat, Terrence, 2006. "Taxing utility," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(1), pages 1-16, February.
    9. Delgado, Michael S. & Khanna, Neha, 2015. "Voluntary Pollution Abatement and Regulation," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 44(1), pages 1-20, April.
    10. Bhattacharya, D., 2018. "Income Effects and Rationalizability in Multinomial Choice Models," Cambridge Working Papers in Economics 1884, Faculty of Economics, University of Cambridge.
    11. List, Christian & Polak, Ben, 2010. "Introduction to judgment aggregation," Journal of Economic Theory, Elsevier, vol. 145(2), pages 441-466, March.
    12. Franke, Jörg & Leininger, Wolfgang & Wasser, Cédric, 2018. "Optimal favoritism in all-pay auctions and lottery contests," European Economic Review, Elsevier, vol. 104(C), pages 22-37.
    13. Che-Yuan Liang, 2017. "Optimal inequality behind the veil of ignorance," Theory and Decision, Springer, vol. 83(3), pages 431-455, October.
    14. Shino, Junnosuke, 2013. "A positive theory of fixed-rate funds-supplying operations in an accommodative financial environment," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 595-610.
    15. Peysakhovich, Alexander & Plagborg-Møller, Mikkel, 2012. "A note on proper scoring rules and risk aversion," Economics Letters, Elsevier, vol. 117(1), pages 357-361.
    16. Badics, Tamás, 2011. "Az arbitrázs preferenciákkal történő karakterizációjáról [On the characterization of arbitrage in terms of preferences]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 727-742.
    17. Peters, Glen, 2008. "Reassessing Carbon Leakage," Conference papers 331753, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    18. Vizard, Polly, 2005. "The contributions of Professor Amartya Sen in the field of human rights," LSE Research Online Documents on Economics 6273, London School of Economics and Political Science, LSE Library.
    19. Bowen, T. Renee & Chen, Ying & Eraslan, Hülya & Zápal, Jan, 2017. "Efficiency of flexible budgetary institutions," Journal of Economic Theory, Elsevier, vol. 167(C), pages 148-176.
    20. Amir, Rabah & Bloch, Francis, 2009. "Comparative statics in a simple class of strategic market games," Games and Economic Behavior, Elsevier, vol. 65(1), pages 7-24, January.

    More about this item

    Keywords

    microeconomics; utility maximization; Kuhn-Tucker theorem;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D00 - Microeconomics - - General - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:47080. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.