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1. Convex sets 1.1. Deﬁnition of a convex set. A set S in Rn is said to be convex if for each x1 , x2 ∈ S, the line segment λx1 + (1-λ)x2 for λ ∈ (0,1) belongs to S. This says that all points on a line connecting two points in the set are in the set.

Figure 1. Examples of Convex Sets

1.2. Intersections of convex sets. The intersection of a ﬁnite or inﬁnite number of convex sets is convex. Figure 2 contains some examples of convex set intersections. 1.3. Hyperplanes. A hyperplane is deﬁned by H = {x: p′ x = α} where p is a nonzero vector in Rn and α is a scalar. This is a line in two dimensional space, a plane in three dimensional space, etc. For the two dimensional case this gives p1 x1 + p2 x2 = α which can be rearranged to yield

Date : April 4, 2008.

1

etc. If x ¯ is any vector vector in a hyperplane H = {x: p′ x = α}. The sets . Half-spaces. Intersections of Convex Sets p1 x1 + p2 x2 = α ⇒ p2 x2 = α − p1 x1 α − p1 x1 ⇒ x2 = p2 p1 α − x1 = p2 p2 This is just a line with slope (-p1 /p2 ) and intercept α/p2 . This subspace is orthogonal to the vector p. so that the hyperplane can be equivalently described as H = { x : p′ x = p′ x ¯} = {x : p′ (x − x ¯) = 0} =x ¯ + { x : p′ x = 0 } The third expression says thay H is an aﬃne set that is parallel to the subspace {x: p′ x = 0}. The sets above are closed half-spaces. This is all the points in 2 dimensional space on one side of a straight line or one side of a plane in three dimensional space. p is called the normal vector of the hyperplane H.2 CONVEXITY AND OPTIMIZATION Figure 2.4. A hyperplane divides the space into two half-spaces. then we must have p′ x ¯=α. and consequently. A half-space is deﬁned by S = {x: p′ x ≤ α} or S = {x: p′ x ≥ α} where p is a nonzero vector in Rn and α is a scalar. 1.

∀ x1 ∈ S1 and ∀ x2 ∈ S2 A separating hyperplane is illustrated in ﬁgure 4. We can then ﬁnd a convex set by ﬁnding the inﬁnite intersection of half-spaces which support it.7. Let S be a nonempty convex set in Rn and let x ¯ be a boundary point. A closed. Separating hyperplanes. that is p ′ x ≤ α ∀ x ∈ S1 p ′ x ≥ α ∀ x ∈ S2 We can also write this as p′ x1 ≤ p′ x2 .CONVEXITY AND OPTIMIZATION 3 {x : a′ x < β } and {x : a′ x > β } are called the open half-spaces associated with the hyperplane {x: a′ x = β }. This can also be written as p′ x ≤ p′ x ¯ for each x which is an element of the closure of S. then there exists as hyperplane H = {x: p′ x = α} that separates them. that is. 1. A 2-dimensional illustration is presented in ﬁgure 3. This is illustrated in ﬁgure 5. A Half-space 1.6. convex set is the intersection of the half spaces that support it. Supporting hyperplane. Figure 3. 1. Minkowski’s Theorem. Then there exists a hyperplane that supports S at x ¯. . Given two non-empty convex sets S1 and S2 in Rn such that S1 ∩ S2 = ∅. there exists a nonzero vector p such that p′ (x − x ¯) ≤ 0 for each x which is an element of the closure of S.5.

Minkowski’s Theorem . A Separating Hyperplane Figure 5.4 CONVEXITY AND OPTIMIZATION Figure 4.

Concave Function f x 200 150 100 50 x 10 20 30 40 Figure 8 shows a convex function. Figure 6. If we draw a line between any two points on the graph. the graph will lie below the line. A convex function with a positive ﬁrst derivative will rise at an increasing rate. A concave function with a positive ﬁrst derivative will rise but at a declining rate.1. The graph of a concave function will always lie below the tangent line at a given point as shown in ﬁgure 7. We also say that a function is convex on an interval if f´ is increasing on the interval and concave on the interval where f´ is decreasing. Figure 6 shows a concave function. The graph of a convex function will always lie above the tangent line at a given point as shown in ﬁgure 9. If f is continuous in the interval I and twice diﬀerentiable in the interior of I (denoted I0 ) then we say 1: f is convex on I ⇔ f”(x) ≥ 0 for all x in I0 . Deﬁnitions of convex and concave functions. Convexity and concavity for functions of a real variable 2. . the graph will lie above the line.CONVEXITY AND OPTIMIZATION 5 2. If we draw a line between any two points on the graph. 2: f is concave on I ⇔ f”(x) ≤ 0 for all x in I0 .

Alternatively points at which a function changes from being convex to concave.6 CONVEXITY AND OPTIMIZATION Figure 7. Point c is an inﬂection point for a twice diﬀerentiable function f if there is an interval (a. 2.2. The ﬁrst derivative is f ′ = 3x2 − 12x + 9 = 3(x2 − 4x + 3). The second derivative is zero at x . are called inﬂection points. Deﬁnition of an inﬂection point.1. The second derivative is f ′′ = 6x − 12 = 6(x − 2). or vice versa.2. Inﬂection points of a function. b) containing c such that either of the following two conditions holds: 1: f ′′ (x) ≥ 0 a < x < c and f ′′ (x) ≤ 0 if c < x < b 2: f ′′ (x) ≤ 0 a < x < c and f ′′ (x) ≥ 0 if c < x < b Intuitively this says that x = c is an inﬂection point if f”(x) changes sign at c. Convex Function fx 200 150 100 50 x 10 20 30 40 2. Tangent Line above Graph for Concave Function Tangent Line 200 f x 150 100 50 x 10 20 30 40 Figure 8. Consider the function f (x) = x3 − 6x2 + 9x + 1.

3).CONVEXITY AND OPTIMIZATION 7 Figure 9. f ′′ > 0. It is not a suﬃcient condition. In ﬁgure 10 the function has a local maximum at one and a local minimum at three. then either f ′′ (c) = 0 or f ′′ (c) does not exist. Test for inﬂection points. Then 1: If c is an inﬂection point for f. When x < 2. Function with Inﬂection Point 4 fx 2 x 1 2 1 2 3 4 4 2. . The function is concave around x = 1 and convex around x = 3. In this case the inﬂection point is at the point (2. and suppose c is an interior point of I. then c is an inﬂection point for f. there must be an inﬂection point. f ′′ < 0 and when x > 2. The condition f ′′ (c) = 0 is a necessary condition for c to be an inﬂection point.2. Given that the graph changes from concave to convex. because f ′′ (c) = 0 does not imply the f ′′ changes sign at x = c.2. Figure 10. however. Tangent Line below Graph for Convex Function fx 200 Tangent Line 150 100 50 x 10 20 30 40 50 = 2. Let f be a function with a continuous second derivative in an interval I. 2: If f ′′ (c) = 0 and f ′′ changes sign at c.

x = 0 is not an inﬂection point for f.25 0.2.02 x 1 0. Figure 11.3. Let f(x) = x4 .12 0.06 0. Example. f ′′ (x) = 0. We can see this in ﬁgure 11. Thus.14 0.04 0. Function with f ′′ = 0.25 0. but no inﬂection point 0.75 1 fx .5 0.08 0.5 0.8 CONVEXITY AND OPTIMIZATION 2.75 0. At x = 0. But for this function f ′′ (x) ≥ 0 for all x = 0 so f ′′ does not change sign at x = 0. Then f ′ (x) = 4x3 and f ′′ (x) = 12x2 .1 0.

y ∈ R1 .1. The area above the curve in ﬁgure 12 is the epigraph of the function. epigraphs and hypographs 3. y): x ∈ S. y).CONVEXITY AND OPTIMIZATION 9 3. The area below the curve in ﬁgure 13 is the hypograph of the function. Epigraph of a function 250 200 Epigraph 150 100 50 x 5 10 15 20 25 3. y ≥ f(x)}. . x ∈ S. Let f: S → R1 .2. Epigraph. Figure 13. Hypograph. Let f: S → R1 . y ≤ f(x)}. The epigraph of f is the set {(x. We can see this in ﬁgure 14. Hypograph of a function 200 fx 150 Hypograph 100 50 x 10 20 30 40 With a more general function the epigraph and hypograph may have boundaries that move up and down as x increases. Figure 12. The hypograph of f is the set {(x. y ∈ R1 .

The function f: S → R1 is said to be convex on S if f ( λ x1 + (1 − λ) x2 ) ≤ λ f (x1 ) + (1 − λ )f ( x2 ) for each x1 .10 CONVEXITY AND OPTIMIZATION Figure 14. Characteristics of convex functions. x2 ∈ S and for each λ ∈ [0. Hypograph of a function fx Epigraph Hypograph x 4. Deﬁnition of convexity. A convex function f x2 fx f x1 x x1 x2 4. Let S be a nonempty convex set in Rn . This basically says that the function evaluated at at a linear combination of x1 and x2 is less than the same linear combination of f (x1 ) and f (x2 ). ∈ S and for each λ ∈ (0. . The function f is said to be strictly convex if the above inequality holds as a strict inequality for each distinct x1 . 1]. a: The function f is continuous on the interior of S. Figure 15. General convex functions 4.2. 1).1. Figure 15 shows a convex function. x2 .

so convexity of a function implies convesity of the lower contour set. and b in the interval with a < x < b we have f (b) − f (a) f (x) − f (a) < . This implies that tangent line is below the graph as we see in ﬁgure 16. then the Hessian H(x) is positive semideﬁnite for each x ∈ S. x. . f(x) ≤ α} is convex for every real α. Thus convexity of f is equivalent to convexity of its epigraph. x ¯ is the global minimum of f over S. This set is the epigraph of f.CONVEXITY AND OPTIMIZATION 11 b: The function f is convex on S if and only if the set {(x. ∂x2 1 ∂2f ∂2f ∂2f ≥ 0 . f: A twice diﬀerentiable function f is convex iﬀ the Hessian H(x) is positive semideﬁnite for each x ∈ S. and 2 − ∂x2 ∂x2 2 1 ∂x2 ∂2f ∂x1 ∂x2 2 ≥ 0 g: Let f be twice diﬀerentiable. y): x ∈ S. the implication is as follows f is convex ⇔ ∂2f ≥ 0. This is the lower contour set. i: If f ′ (¯ x) = 0 for a convex function then. Figure 16. c: The set {x ∈ S. x ¯ ∈ S. f is strictly concave. Further if f is strictly concave. A convex function with tangent below graph fx 4 3 fx 2 Tangent Line 1 x 10 20 30 40 e: A function of a single variable f is convex on an interval if for a. d: A diﬀerentiable function f is convex on S if and only if f ( x) ≥ f (¯ x ) + f ′ (¯ x) (x − x ¯) f or each distinct x. For the case of function of two variables. x − a b − a This basically says that the chord between two points lies above the function as in the initial deﬁnition. Then if the Hessian H(x) is positive deﬁnite for each x ∈ S. y ≥ f(x)} is convex. h: Every local minimum of f over a convex set W ⊆ S is a global minimum.

1). d: A diﬀerentiable function f is convex on S if and only if f (x) ≤ f (¯ x) + f ′ (¯ x) (x − x ¯) f or each distinct x. e: A function of a single variable f is concave on an interval if for a.1.2. f(x) ≥ α } is convex for every real α. f: A twice diﬀerentiable function f is concave iﬀ the Hessian H(x) is negative semideﬁnite for each x ∈ S. c: The set {x ∈ S. General concave functions 5. x2 ∈ S and for each λ ∈ [0. x2 . Thus concavity of f is equivalent to convexity of its hypograph. Let S be a nonempty convex set in Rn . This set is the hypograph of f. x.12 CONVEXITY AND OPTIMIZATION 5. This is convexity of the upper contour or level set. ∈ S and for each λ ∈ (0. and b in the interval with a < x < b we have f (x) − f (a) f (b) − f (a) > x − a b − a This basically says that the chord between two points lies below the function as in the initial deﬁnition. The function f: S → R1 is said to be convex on S if f (λ x1 + (1 − λ) x2 ) ≥ λ f (x1 ) + (1 − λ )f (x2 ) for each x1 . Characteristics of concave functions. Deﬁnition of concavity. A concave function f x2 fx f x1 x1 x2 x 5. x ¯ ∈ S. Figure 17 shows a concave function. y ≤ f(x)} is convex. The function f is said to be strictly concave if the above inequality holds as a strict inequality for each distinct x1 . This implies that tangent line is above the graph as we see in ﬁgure 18. Figure 17. 1]. b: The function f is concave on S if and only if the set {(x. y): x ∈ S. This basically says that the function evaluated at a linear combination of x1 and x2 is greater than the same linear combination of f (x1 ) and f (x2 ). . a: The function f is continuous on the interior of S.

i: If f ′ (¯ x) = 0 for a concave function then. ∂x2 1 ∂2f ∂2f ∂2f ≤ 0 . x2 ∈ X. f (x) ≥ f (x0 ) ⇒ f ( λ x + +(1 − λ) x0 ) ≥ f (x0 ) (2) Theorem 1.f is quasiconcave. A real valued function f.CONVEXITY AND OPTIMIZATION 13 Figure 18. then the Hessian H(x) is negative semideﬁnite for each x ∈ S.α) is a convex set for every α ∈ R and let x1 ∈ X.¯ α) is convex. Further if f is strictly concave. Let f be a real valued function deﬁned on a convex set X ⊂ Rn . x ¯ is the global maximum of f over S. Hence . For the case of function of two variables. Quasiconcavity 6. f is strictly concave.1. a said to be quasiconcave if f ( λ x1 + +(1 − λ) x2 ) ≥ min[f (x1 ). deﬁned on a convex set X ⊂ Rn . 6. and because S(f. Then if the Hessian H(x) is negative deﬁnite for each x ∈ S. 2 1 2 1 f(x )]. Deﬁnitions of Quasiconcavity.¯ α) and x ∈ S(f. The upper contour sets {(x. the implication is as follows f is concave ⇔ ∂2f ≤ 0. (λx + (1-λ)x2 ) ∈ S(f. (1) The following expression also deﬁnes a quasi-concave function and is equivalent to equation 1.¯ α) for arbitrary λ. y): x ∈ S. Suppose that S(f. and 2 − ∂x2 ∂x2 2 1 ∂x2 ∂2f ∂x1 ∂x2 2 ≥ 0 h: Every local maximum of f over a convex set W ⊆ S is a global maximum. Then x ∈ S(f. α ≤ f(x)} of f are convex for every α ∈ R if and only if f is a quasiconcave function. Deﬁnition 1. α ¯ = min[f(x1 ). f (x2 ) ] A function f is said to be quasiconvex if . A concave function with tangent above graph fx Tangent Line fx x g: Let f be twice diﬀerentiable.¯ α). Proof.

x2 ∈ X such that f (x1 ) ≥ f (x2 ) we have (6) . and because f is quasiconcave. A level set for a quasi-concave function (5) xj 40 35 30 25 20 15 10 5 xi 10 20 30 40 50 Theorem 2. we have f (x2 ) ≥ α (3) (4) f (λ x1 + (1 − λ) x2 ) ≥ α and (λx1 + (1-λ) x2 ) ∈ S(f.α). Let x1 ∈ S(f. We can see this is ﬁgure 19 Figure 19. let S(f. Then f (x1 ) ≥ α.α) be any level set of f.14 CONVEXITY AND OPTIMIZATION f (λ x1 + (1 − λ) x2 ) ≥ α ¯ = min[f (x1 ). f (x2 ) ] Conversely.α) and x2 ∈ S(f. Let f be diﬀerentiable on an open convex set X ⊂ Rn . Then f is quasiconcave if and only if for any x1 ∈ X.α).

. n (8) Deﬁnition 3.: If f(x) is quasi-concave on a solid (non-empty interior) convex set X ⊂ Rn . 2. n (9) ∂f ∂xk ˜B H = ˆB H 0 ∂f ∂x1 = ∂f ∂x2 ∂f ∂x3 0 ∂f ∂x1 ∂2f ∂x2 1 ∂2f ∂x2 ∂x1 ∂2f ∂x3 ∂x1 ∂f ∂x2 ∂2f ∂x1 ∂x2 ∂2f ∂x2 2 ∂2f ∂x3 ∂x2 ∂f ∂x3 ∂2 f ∂x1 ∂x3 ∂2 f ∂x2 ∂x3 ∂2 f ∂x2 3 6. Dk (f. . A certain number of row exchanges will be necessary to move the bottom row to the top. . Some authors deﬁne the kth-ordered bordered determinant Dk (f. . 2. ∂f ∂xk 0 k = 1. 2. . . Given that equations 8and 9 are the same except for this even number of row and column exchanges.2. x) = det ∂x2 . a. n (10) . . The kth-ordered bordered determinant Dk (f. then (−1)k Dk (f. 6.1.2. . . ∂2f ∂x2 k k = 1. You can illustrate this to yourself using the following three variable example. . . ∂2 f ∂x2 1 ∂2 f ∂x2 ∂x1 ∂2 f ∂x3 ∂x1 ∂f ∂x1 ∂2 f ∂x1 ∂x2 ∂2 f ∂x2 2 ∂2 f ∂x3 ∂x2 ∂f ∂x2 ∂2 f ∂x1 ∂x3 ∂2 f ∂x2 ∂x3 ∂2 f ∂x2 3 ∂f ∂x3 ∂f ∂x1 ∂f ∂x2 ∂f ∂x3 ∂f ∂x 1 ∂f Dk (f. . . x) = det . . k = 1. ∂2 f 2 2 ∂ f ∂ f ∂xk ∂x1 ∂xk ∂x2 · · · ∂x2 k (7) of a twice diﬀerentiable function f at ∂f ∂x1 ∂f ∂x2 ∂f ∂x1 ∂f ∂x2 ··· ∂f ∂xk . the determinants will be the same. ∂2f ∂xk ∂x1 ∂2f ∂xk ∂x2 ∂f ∂xk ∂2f ∂x1 ∂xk ∂2f ∂x2 ∂xk . . A like number of column exchanges will be necessary to move the rightmost column to the left. Deﬁning quasi-concavity in terms of determinants of a bordered Hessian matrix. If we interchange any two rows or any two columns of a determinant. . . . Deﬁnition 2. .x) of a twice diﬀerentiable function f at at point x ∈ Rn in a diﬀerent fashion where the ﬁrst derivatives of the function f border the Hessian of the function on the top and left as compared to in the bottom and right as in equation 8. Quasi-concavity and bordered Hessians.2.2. . . A set of determinants of a bordered Hessian matrix. . . . the determinant will change sign but keep its absolute value. . . x) ≥ 0. . 0 ∂f ∂x1 ∂2f ∂x2 1 ∂2f ∂x2 ∂x1 ∂f ∂x2 ∂2f ∂x1 ∂x2 ∂2f ∂x2 2 ··· ··· ··· .x) at point x ∈ Rn is deﬁned as 2 ∂ f ∂2f ∂2 f · · · ∂x ∂x1 ∂x2 ∂x2 1 ∂xk 1 2 ∂2f ∂2 f ∂ f · · · ∂x2 ∂x1 ∂x2 ∂xk ∂x2 2 . ··· The determinant in equation 8 and the determinant in equation 9 will be the same. . .CONVEXITY AND OPTIMIZATION 15 (x1 − x2 )′ ∇f (x2 ) ≥ 0 6. .

p. ∂2f ∂x2 n where det HB is the determinant of the bordered Hessian of the function f. k = 1. . Thus when a function is quasi-concave Fii F will have a negative sign. Dk (f. .x) will be negative and when k is even.x)will alternate in sign beginning with positive in the case of two variables.149]. x) > 0. ∂2 f ∂xn ∂x1 ∂2f ∂xn ∂x2 . . . ··· F = ∂f ∂xn ∂2f ∂x1 ∂xn ∂2f ∂x2 ∂xn = det HB (12) .16 CONVEXITY AND OPTIMIZATION for every x ∈ X. . Let 0 ∂f ∂x1 ∂f ∂x2 ∂f ∂x1 ∂2 f ∂x2 1 ∂2 f ∂x2 ∂x1 ∂f ∂x2 ∂2f ∂x1 ∂x2 ∂2f ∂x2 2 ··· ··· ··· . Since the ordering of rows since is arbitrary it is also clear that Fii and F have opposite signs. . It is clear that Fnn and F have opposite signs because F cofactor of ∂x i ∂xj includes the last row and column of HB and Fnn does not. . 6. ∂f ∂xn . 2. . . Relationship of quasi-concavity to signs of minors (cofactors) of a matrix. Thus Dk (f. 781-782] If f is quasiconcave. . Arrow and Enthoven [2. b. Now let Fij be the ∂2f in the matrix HB .2. n (11) for every x ∈ X.3. Dk (f. then when k is odd. . . If the (-1)n in front of the cofactors is positive then Fnn must be positive with F negative and vice versa. p. .x) will be positive.then f(x) is quasi-concave on X (Avriel [3.: If (−1)k Dk (f.

Princeton University Press. Sherali. Avriel. G. Linear Algebra.. Nonlinear Programming 2nd Edition.D. Mathematical Analysis for Economists. M. 1959 [6] Hadley.D. 1938 Arrow. New Haven. Reading. R. Martins’s Press. New York: John Wiley and Sons. 1970. ”Quasi-Concave Programming. H. Bazaraa. R. C. Convex Analysis. Nonlinear Programming.. 1993. M. Shetty.CONVEXITY AND OPTIMIZATION 17 References [1] [2] [3] [4] Allen. . and R. G. CN: Yale University Press. K. J. Enthoven. 1961 [7] Rockafellar. NJ: Prentice-Hall. M.” Econometrica 29 (1961):779-800. Theory of Value.G. T. 1976. New York: St. Englewood Cliﬀs. [5] Debreu. MA: Addison-Wesley. Inc. and C. S.

Convex optimisation for economics

Convex optimisation for economics

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