Chapter

The Concavity of Additive Utility Functions

W. M. Gorman

Edited by C. Blackorby and A. F. Shorrocks

in Separability and Aggregation

Published in print January 1996 | ISBN: 9780198285212
Published online November 2003 | e-ISBN: 9780191596322 | DOI: http://dx.doi.org/10.1093/0198285213.003.0009
 The Concavity of Additive Utility Functions

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This paper is from an unpublished typescript from the University of North Carolina (1970). When confronted with additivity, it is far more convenient to use profit functions than cost functions or indirect utility functions. The reason for this is that if the objective function is additive then the resulting profit function is also additive, so one does not lose all of the explicit original structure in moving to the dual. To be able to do this, however, each of the functions in question must be concave. However, concavity is typically not an easy assumption to accept in utility theory. The question addressed in this paper is whether concavity is more plausible in the case of additive separability.

Keywords: additive separability; additive utility functions; additivity; concavity; profit functions; separability

Chapter.  4014 words. 

Subjects: Microeconomics

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