The (Nonstochastic) Producer Problem

Abstract

The canonical profit maximization problem is surveyed. The concept of a technology set, T, is developed by interpreting ≽(y) as an order that characterizes technically feasible possibilities. Basic properties of T are discussed in terms of Y(x) and related to the generic properties of ≽(y) developed in Chapter 3. Distance functions are shown to characterize T, and the consequences of different structural restrictions routinely used in applied producer (and consumer) analysis are investigated. The canonical profit maximization problem is revisited using conjugate dual arguments and the LeChatelier Principle is discussed. The chapter closes with a brief discussion of Revealed Preference Methods in producer theory.