Strict Monotonicity in Comparative Statics

Economists commonly seek to show that one variable increases in response to changes in another variable. This paper provides sufficient conditions to draw such strict monotone comparative statics conclusions in optimization problems with and without binding constraints. These results extend the latt...

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Bibliographic Details
Published in:Journal of economic theory 1998-07, Vol.81 (1), p.201-219
Main Authors: Edlin, Aaron S., Shannon, Chris
Format: Article
Language:English
Subjects:
Comparative analysis
Economic models
Economic theory
Manufacturing
Optimization
Studies
Taxation
Taxes
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Summary:Economists commonly seek to show that one variable increases in response to changes in another variable. This paper provides sufficient conditions to draw such strict monotone comparative statics conclusions in optimization problems with and without binding constraints. These results extend the lattice-theoretic results of Milgrom and Shannon [10] by imposing a stronger differential version of the single crossing property and arguing from first-order conditions. We illustrate the importance of these results through applications involving holdup problems, output decisions, optimal tax problems, and modern manufacturing.Journal of Economic LiteratureClassification Numbers: C61, D82.
ISSN:0022-0531
1095-7235
DOI:10.1006/jeth.1998.2405