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Kuhn-Tucker theory

In: Mathematical Modelling for Economists

Author

Listed:
  • Donald A. R. George

Abstract

In Chapter 2 the maximisation and minimisation of real-valued functions was discussed in some detail. In this chapter, this theme is developed in a way which has proved of major significance in economics. Economists frequently model behaviour by assuming that some agent in maximising (or possibly, minimising) some well-defined objective function, subject to a number of constraints. Consumers are supposed to maximise their ‘utility’, subject to a budget constraint. Firms might be assumed to maximise their growth rate subject to a lower limit on profits. Governments’ behaviour is sometimes modelled as the maximisation of a ’social welfare function’ subject to the behavioural constraints of economic agents. In a sense, constrained maximisation has come to represent a kind of paradigm, namely that of rational behaviour. It can be shown for example (see Debreu, 1959), that a rational agent with a certain type of consistent preference will behave as if he or she were maximising a continuous utility function.

Suggested Citation

  • Donald A. R. George, 1988. "Kuhn-Tucker theory," Palgrave Macmillan Books, in: Mathematical Modelling for Economists, chapter 3, pages 35-48, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-19238-0_3
    DOI: 10.1007/978-1-349-19238-0_3
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