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Verifying Curvature of Profit and Cost/Expenditure Functions

Author

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  • David M. Mandy

    (Department of Economics, University of Missouri)

Abstract

Convexity or concavity of optimal value functions is sometimes checked by evaluating leading principal minors of the Hessian matrix. This practice is not justified by extant theorems about semidefinite matrices. A theorem is presented that justifies the practice and provides a relatively easy method of proving the relationship between semidefiniteness and principal minors.

Suggested Citation

  • David M. Mandy, 2016. "Verifying Curvature of Profit and Cost/Expenditure Functions," Working Papers 1611, Department of Economics, University of Missouri, revised 17 Apr 2017.
    • Handle: RePEc:umc:wpaper:1611
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    Cited by:

    1. Kaplan, David M. & Zhuo, Longhao, 2021. "Frequentist properties of Bayesian inequality tests," Journal of Econometrics, Elsevier, vol. 221(1), pages 312-336.

    More about this item

    Keywords

    Profit/Cost/Expenditure Function; Semidefinite Hessian; Principal Minors;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics

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