Document Type
Discussion Paper
Publication Date
8-2024
CFDP Number
2405
CFDP Pages
20
Journal of Economic Literature (JEL) Code(s)
C65, D60
Abstract
This paper shows that it is possible to define an unambiguous notion of the direct effect of a parameter perturbation on the value of an optimization problem’s objective away from an optimum for problems with linearly homogeneous constraints. This notion of the direct effect relies on reformulating the optimization problem using shares as choice variables, and has the interpretation of holding choice variables — when formulated as shares — fixed. This short paper contains one formal “non-envelope” theorem and four applications to i) consumer demand, ii) cost minimization, iii) planning in exchange economies, and iv) planning in production economies.
Recommended Citation
Dávila, Eduardo and Schaab, Andreas, "A Non-Envelope Theorem with Linearly Homogeneous Constraints" (2024). Cowles Foundation Discussion Papers. 2807.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2807