| Sumario: | The envelope theorem is a genuine workhorse of economic analysis. Typically, this theorem requires that the choice variables be continuous. This paper derives envelope theorems, previously unavailable in the literature, for use with integer and discrete choice variables. Our results, which are intuitive, thus make it possible to use the envelope theorem in a variety of analyses in which the natural description of choice variables is not continuous. Among such choice variables are the number of projects, plants, and a couple's children, as well as binary (yes-no) choices such as labor-force participation, home ownership, and migration. Reprinted by permission of the publisher.
|
|---|