A COMPLETE THEORY OF COMPARATIVE STATICS FOR DIFFERENTIABLE OPTIMIZATION PROBLEMS
A new comparative statics formalism using generalized compensated derivatives is presented that, in contrast to existing methodologies, directly yields constraint-free semidefiniteness results for any differentiable, constrained optimization problem. The formalism provides a natural and powerful method of constructing comparative statics results, free of constraints and unrestricted in scope. New results on envelope relations, invariance conditions, rank inequalities and non-uniqueness are derived that greatly extend their utility and reach. The methodology is illustrated by deriving the comparative statics of multiple linear constraint utility maximization models and the principal-agent problem with hidden actions, both highly nontrivial and hitherto unsolved problems. Copyright Blackwell Publishing Ltd 2006.
Year of publication: |
2006
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Authors: | Partovi, M. Hossein ; Caputo, Michael R. |
Published in: |
Metroeconomica. - Wiley Blackwell, ISSN 0026-1386. - Vol. 57.2006, 1, p. 31-67
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Publisher: |
Wiley Blackwell |
Saved in:
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