Novel insights into the multiplier rule
We present the Lagrange multiplier rule, one of the basic optimization methods, in a new way. Novel features include: • Explanation of the true source of the power of the rule: reversal of tasks, but not the use of multipliers. • A natural proof based on a simple picture, but not the usual technical derivation from the implicit function theorem. • A practical method to avoid the cumbersome second order conditions. • Applications from various areas of mathematics, physics, economics. • Some hnts on the use of the rule.
|Keywords||bargaining, dynamical systems, economics, finance, multiplier rule, second order condition|
Brinkhuis, J., & Protassov, V.. (2005). Novel insights into the multiplier rule (No. EI 2005-39). Report / Econometric Institute, Erasmus University Rotterdam. Retrieved from http://hdl.handle.net/1765/7026