# convex set in economics

However, recall that for strict preferences, the concepts of ‐convexity and ‐strict‐convexity are equivalent (VIII). To illustrate, assume that job candidates are evaluated according to research, teaching, and charm. Case (i): . Example 1.Let X be a (finite or not) subset of and let contain exactly two orderings: the increasing ordering and the decreasing ordering . (Let . Proof. Recall that the “persuading argument” for that lies behind the notion of ‐convexity is the existence for any criterion of an alternative that is ranked weakly below b by the criterion and still is weakly superior to a. Let h be a strictly increasing function such that everywhere. The full text of this article hosted at iucr.org is unavailable due to technical difficulties. Thus, by the separating hyperplane theorem, there is some algebraic ordering such that b lies strictly below . Observation.A preference is ‐strictly convex if and only if it is singled‐peaked on X (that is, there are no three alternatives such that ). Let S be a finite set of states and let Z be a set of outcomes. For the other direction, let ≿ be a preference satisfying the equal covering property. 10. The argument for a convex function is symmetric. Let consist of all such induced orderings over X. Consequently, for all x, . Given a nonempty, closed, convex set X ˆRnand x 2Rn, x 2=X. Learn more. Thus [1;0]T is a direction of this convex set.57 4.7 An Unbounded Polyhedral Set: This unbounded polyhedral set has many Maxmin functions have a long history, originating with Wald (1950). In Proposition 2 we proved that when X is finite, any ‐strictly‐convex preference relation has a ‐maxmin representation. Notice that for all , since if , then since . Experience in economics and other ﬁelds shows that such assump-tions models can serve useful purposes. (ii) By part (i), ≿ is ‐strictly‐convex. Thus if you want to determine whether a function is strictly concave or strictly convex, you should first check the Hessian. He evaluates each menu by its worst possible state. Therefore, g is strictly increasing everywhere and . Since ≿ and give exactly the same ranking over , the function represents on . Nonetheless it is a theory important per se, which touches almost all branches of mathematics. This motivates the following definition: Given a preference relation ≿, the set contains every ordering that satisfies the condition “for every , if , then .” Define . Therefore, represents for all k. For all , , and for all , . Let consist of all such induced orderings over X.◊. This conclusion was proved by Gorno and Natenzon (2018), who in fact show that any weakly monotonic menu preference ≿ can be represented in this manner.      Course regulations Technology Convexity Some useful results Theorem 1. A preference relation is defined to be convex when it satisfies the following condition: If, for each criterion, there is an element that is both inferior to b by the criterion and superior to a by the preference relation, then b is preferred to a. Define if . Since, is always nonempty, it follows that , and so for all x. not convex. (Monotonic Preferences Over Menus), Example 5. For n = 1, the definition coincides with the definition of an interval: a set of numbers is convex if and only if it is an interval. ECONOMICS DEPARTMENT Thayer Watkins. If , then and since , it must be that and, therefore, . Index all elements in Z as and attach to each set , a vector , where if and otherwise. That is, they represent a larger class of preferences for , but they are not ‐maxmin representations since the are ‐weakly increasing but do not represent . To show that it satisfies the equal covering property, let be an equal cover of a set A and WLOG assume that . Since , take a sequence such that . (Monotonic Preferences Over Menus)Let Z be a finite set of alternatives and let X be the set of all nonempty menus of Z. The SWF ranks x at least as high as y if . Thus, our analysis can be thought of as being within the single‐profile approach in social choice, where a preference relation is built on a specific profile of preference relations without requiring consistency in its definition across various profiles. x' Our goal is to now show that . Since , it follows that and, therefore, , which is contradiction. Then any continuous ‐strictly‐convex preference relation ≿ has a ‐maxmin representation. The theory of convex functions is part of the general subject of convexity since a convex function is one whose epigraph is a convex set. Then and for every l, either or , which implies by strict convexity that , a contradiction. Methods for constructing preference relations are the focus of social choice theory, where the social preferences are determined as a function of the individuals' preferences (Arrow and Raynaud, 1986). x This ordering bottom‐ranks B and all of its subsets and ranks all other sets above it. Thus, implies that (inclusion is strict because ) and by the strict monotonicity of ≿. If ≿ is a continuous ‐strictly‐convex preference relation (not necessarily monotonic), then it has a ‐maxmin representation. Proof.Let U and be continuous functions representing ≿ and , respectively, each with a range of . More precisely, we can make the following definition (which is again essentially the same as the corresponding definition for a function of a single variable). Note that the Borda rule is a typical SWF that is not necessarily convex. This representation can be extended by attaching to each alternative the unique alternative on the main diagonal to which it is indifferent (its existence is guaranteed by monotonicity and continuity). In the analysis, we take these orderings to be primitives and explore the preferences that are convex with respect to them. Thus, for strict preferences, Propositions 1 and 2 together provide an exact equivalence between ‐convexity and the existence of a ‐maxmin representation. □. (1 − λ)f(x) + λf(x')) ∈ L for any λ ∈ [0, 1]. If λ1 < 1 then. Equivalently, a function is convex if its epigraph is a convex set. Notice that for weak preferences, Propositions 1 and 2 do not form a complete if‐and‐only‐if characterization because Proposition 1 demonstrates ‐convexity and Proposition 2 requires ‐strict‐convexity. The persuading argument behind the notion of ‐concavity is the existence for each criterion of an alternative that is ranked weakly above a by the criterion and still is weakly inferior to b. Expand on to represent with values taken from the interval . Convex Sets. To obtain a related but different representation in our framework, one can take the alternatives to be objective vectors and take the set to be a set of orderings represented by functions of the type . To see this, take y such that and . For x ∈ X , the upper contour set of x is. Now in case you don't know, in economics, "convex preferences" means preferences such that the set of preferences that are at least as preferred to some bundle is convex. If the Hessian is not negative definite for all values of x but is negative semidefinite for all values of x, the function may or may not be strictly concave. In any convex subset of Euclidean space with any collection of linear orderings , an even stronger property holds: For any x and y, and any point z on the line segment between them, z is sandwiched between x and y according to every algebraic linear ordering. Then . Take , where for all and for all . We can determine the concavity/convexity of a function by determining whether the Hessian is negative or positive semidefinite, as follows. a2 ).. Two common examples are the exponential function y = exp(x) and the square function y = x 2.. See also concave function. Thus, by the definition of ‐convexity, . This kind of representation can be thought of as a state‐dependent maxmin utility. □. The reader will now be expecting an attempt to connect the notion of ‐strict concavity to dual representations in the spirit of Propositions 1–4, and we shall not disappoint. Notice that there cannot be such that . Obviously, the same set X endowed with different sets of primitive orderings may have different sets of convex preferences. Then any continuous ‐strictly‐convex preference relation ≿ has a ‐maxmin representation. λ1 = 1 then λ2 = ... = λm+1 = 0, so that the inequality is trivially satisfied. The set in the first figure is convex, because every line segment joining a pair of points in the set lies entirely in the set. The following argument is precise. Enter your email address below and we will send you your username, If the address matches an existing account you will receive an email with instructions to retrieve your username, We now turn to the main analytical result—a, By continuing to browse this site, you agree to its use of cookies as described in our, I have read and accept the Wiley Online Library Terms and Conditions of Use, Example 4. In the construction, we use , a continuous utility representation of ≿ (whose existence is guaranteed by the continuity of ≿). Define . Thus, h and g form the required representation of ≿. Thus, ≿ has a ‐maxmax representation. In our approach, the agent has in mind a set of primitive orderings , where each is a complete and transitive binary relation (which may have indifferences) over a set of alternatives X. There exists p 2Rn;p 6= 0, and c 2R such that X ˆfy jyp cg and xp