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Abstract

For an ordinary linear program it is well known that, if the resources are evaluated at marginal prices determined by an optimal dual solution, then this imputed value is identical with the value of the primal objective function. For a convex program with a nonlinear objective function and linear constraints this identity in general does not hold. The resulting difference is due to a returns to scale associated with the objective function, as earlier pointed out by Balinski and Baumol [1]. In this paper we consider a certain perturbation of the objective function that characterizes the difference between the objective function value and imputed marginal cost. This perturbation, when applied to a certain class of profit maximizing monopolies, explains the difference between the monopoly price and the marginal production cost.

Details

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Title
Notes: AN OBJECTIVE FUNCTION PERTURBATION WITH ECONOMIC INTERPRETATIONS
Publication title
Volume
27
Issue
2
Pages
231
Number of pages
7
Publication year
1981
Publication date
Feb 1981
Publisher
Institute for Operations Research and the Management Sciences
Place of publication
Linthicum
Country of publication
United States
ISSN
00251909
e-ISSN
15265501
CODEN
MNSCDI
Source type
Scholarly Journal
Language of publication
English; EN
Document type
statistics
ProQuest document ID
205846723
Document URL
https://www.proquest.com/scholarly-journals/notes/docview/205846723/se-2?accountid=208611
Copyright
Copyright Institute for Operations Research and the Management Sciences Feb 1981
Last updated
2024-11-23
Database
ProQuest One Academic