Center for Economic Research, Department of Economics, University of Minnesota
Consumer demand and production microeconomic models with kink points
are analyzed. Kink points in demand or production schedules may arise
due to binding nonnegative constraints, quantity rationing, production
quotas or increasing block prices. The occurrence of various kink points
divides the schedule into various regimes with structural change. The
switching conditions for the regimes can be determined by the comparison
of market prices with some appropriate virtual prices. Several equivalent
switching regime conditions are also derived in terms of demand
functions. The proposed approach unifies the direct and dual approaches
and suggests appropriate econometric models for convex budget sets in
consumer demand and production economics.
Lee, L. and Pitt. M.M., (1984), "Microeconometric Analysis of Kink Points: The Convex Case", Discussion Paper No. 201, Center for Economic Research, Department of Economics, University of Minnesota.
Lee, Lung-Fei; Pitt, Mark M..
Microeconometric Analysis of Kink Points: The Convex Case.
Center for Economic Research, Department of Economics, University of Minnesota.
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