The properties of concave revenue functions (in input terms) are often of considerable importance in the theory of the firm. One reason for this is the similarity between the sufficient conditions for an interior maxima (the requirement that the Hessian matrix be negative semidefinite) and the necessary and sufficient conditions for concavity. However, the concavity assumption imposes severe restrictions on the production and demand functions which apparently have not been acknowledged in the literature. It is the purpose of this note to explore these restrictions and to point out their implications for a proper formulation of some microeconomic problems.
ASJC Scopus subject areas
- Economics and Econometrics