Local versus Global Profit Maximization: The Case of Discrete Concave Production Functions

Somdeb Lahiri (lahiriifmr.ac.in)

Abstract: In this paper we show that for discrete concave functions, a local maximum need not be a global maximum. We also provide examples of discrete concave functions where this coincidence holds. As a direct consequence of this, we can establish the equivalence of local and global profit maximizers for an equivalent well-behaved production function that is generated by a (not necessarily discrete concave) production function.

Keywords: local maximum, global maximum, discrete concave, profit maximization

Category 1: Applications -- OR and Management Sciences (Finance and Economics )

Category 2: Combinatorial Optimization (Other )

Category 3: Global Optimization (Theory )

Citation: (mimeo)Institute for Financial Management & Research, August 2006.

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Entry Submitted: 08/21/2006
Entry Accepted: 08/21/2006
Entry Last Modified: 08/30/2006

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