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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, 2017. "Verifying Curvature of Profit and Cost/Expenditure Functions," Working Papers 1705, Department of Economics, University of Missouri.
    • Handle: RePEc:umc:wpaper:1705
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    References listed on IDEAS

    as
    1. Fuente,Angel de la, 2000. "Mathematical Methods and Models for Economists," Cambridge Books, Cambridge University Press, number 9780521585293.
    2. Abadir,Karim M. & Magnus,Jan R., 2005. "Matrix Algebra," Cambridge Books, Cambridge University Press, number 9780521537469.
    3. repec:cup:cbooks:9780521822893 is not listed on IDEAS
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    Cited by:

    1. David M. Kaplan & Longhao Zhuo, 2015. "Bayesian and frequentist inequality tests," Working Papers 1516, Department of Economics, University of Missouri, revised Feb 2018.

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    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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