Duality

In Chapter 4 we described a set VO(y) which we argued was an "outer

bound" to the true input requirement set V(y). Given data (wt, xt , yt),
VO(y) is defined to be
VO(y) = {x : wtx > wtxt for all t such that yt 5 y).
It is straightforward to verify that VO(y) is a closed, monotonic, and convex
technology. Furthermore, as we observed in Chapter 4, it contains any
technology that could have generated the data (wt, xt, yt) for t = 1, -. . , T.
If we observe choices for many different factor prices, it seems that VO(y)
should "approach" the true input requirement set in some sense. To make
this precise, let the factor prices vary over all possible price vectors w > 0.
Then the natural generalization of VO becomes