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Conditional Factor Demands and Positive Output Effects: A Necessary and Sufficient Condition
Archive ouverte : Article de revue
Edité par HAL CCSD ; Economics Bulletin
International audience. The duality between cost and production functions has been thoroughly studied and is well-known. A given set ofassumptions on the technology implies a set of restrictions on the Jacobian of the cost function and on a subset of itsHessian matrix. The vector of second derivatives of the cost function with respect to the input prices and the outputhas not been fully characterized, however. In this note, we present a necessary and sufficient condition to ensure thatthe components of this vector are all strictly positive. That is, we specify the condition for all conditional demandfunctions to be simultaneously increasing in output. This condition is interpreted as a strengthening of the quasiconcavity of the production function.
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