Two Pitfalls of Linearization Methods

This paper illustrates two types of pitfalls in using linearization methods. First, if constraints are linearized before deriving optimality conditions, the derived conditions are not correct up to first order. Second, even when the behavior of the economy is correct to the first order, applying this behavior to welfare implications may lead to incorrect results

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Year of publication:	2008
Authors:	Kim, Jinill ; Kim, Sunghyun Henry
Publisher:	[S.l.] : SSRN
Subject:	Wirtschaftstheorie \| Economic theory \| Wirtschaftsmodell \| Economic model \| Wissenschaftliche Methode \| Scientific method

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Extent:	1 Online-Ressource (15 p)
Series:	FEDS Working Paper ; No. 2007-64
Type of publication:	Book / Working Paper
Language:	English
Notes:	Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 2007 erstellt
Other identifiers:	10.2139/ssrn.1160363 [DOI]
Classification:	C6 - Mathematical Methods and Programming
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10014216561