Verifying Curvature of Profit and Cost/Expenditure Functions
Year:
2017
Working Paper Number:
WP 17-05
Abstract:
Convexity or concavity of optimal value functions is sometimes checked by evaluating leading principal minors of the Hessian matrix. This practice is not justified by extant theorems
about semidefinite matrices. A theorem is presented that justifies the practice and provides a relatively easy method of proving the relationship between semidefiniteness and principal minors.