Centre for Discrete and Applicable Mathematics

 CDAM Research Report, LSE-CDAM-2005-05

March 2005

A reformulation of the Wong-Viner Envelope Theorem for subdifferentiable functions

Anthony Horsley and Andrew J. Wrobel


The Wong-Viner Envelope Theorem on the equality of long-run and short-run marginal costs (LRMC and SRMC) is reformulated for convex but generally nondifferentiable cost functions. The marginal cost can be formalized as the multi-valued subdifferential a.k.a. the subgradient set but, in itself, this is insufficient to extend the result effectively, i.e., to identify suitable SRMCs as LRMCs. This goal is achieved by equating the profit-imputed values of the fixed inputs to their prices. Thus reformulated, the theorem is proved from a lemma on the sections of the joint subdifferential of a bivariate convex function. The new technique is linked to the Partial Inversion Rule of convex calculus.

A PDF file (180 kB) with the full contents of this report can be downloaded by clicking here.

Alternatively, if you would like to get a free hard copy of this report, please send the number of this report, LSE-CDAM-2005-05, together with your name and postal address to:
CDAM Research Reports Series
Centre for Discrete and Applicable Mathematics
London School of Economics
Houghton Street
London WC2A 2AE, U.K.
Phone: +44(0)-20-7955 7732.
Fax: +44(0)-20-7955 6877.
Email: info@maths.lse.ac.uk 

Introduction to the CDAM Research Report Series.
CDAM Homepage.

Copyright © London School of Economics & Political Science 2005

Last modified: 9th March 2005