Slopes of shadow prices and Lagrange multipliers

Abstract Manyeconomicmodels andoptimizationproblems generate(endogenous) shadow prices--alias dual variables or Lagrange multipliers. Frequently the "slopes" of resulting price curves--that is, multiplier derivatives--are of great interest. These objects relate to the Jacobian of the optimality conditions. That particular matrix often has block structure. So, we derive explicit formulas for the inverse of such matrices and, as a consequence, for the multiplier derivatives. Keywords Sensitivity

• Type: Journal
• Year: 2008
• Where: OL
• Authors: Sjur Didrik Flåm, Hubertus Th. Jongen, Oliver Stein
• Keywords: Abstract Manyeconomicmodels Andoptimizationproblems, Dual Variables, Multiplier Derivatives, OL 2008