ECON5210 Lecture 4: Convex and Concave Functions

Rui Tang, HKUST

Email: ruitang@ust.hk
Office hour: Tuesday 4-5 p.m.
Quasiconvex Function

Definition
A function u : X → R is quasiconvex if for all x, y ∈ X and t ∈ [0, 1],

u(tx + (1 − t)y ) ≤ max{u(x), u(y )}.

A function u : X → R is strictly quasiconvex if for all x 6= y and t ∈ (0, 1),

u(tx + (1 − t)y ) < max{u(x), u(y )}.

Remark 1. (Strictly) quasiconvex utility functions correspond to (strictly)

concave preference.
Remark 2. If f : R → R is an increasing or decreasing function, then it is
quasiconvex.

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Convex Functions

Definition
A function u : X → R is convex if for all x, y ∈ X and t ∈ [0, 1],

u(tx + (1 − t)y ) ≤ tu(x) + (1 − t)u(y ).

A function u : X → R is strictly convex if for all x 6= y and t ∈ (0, 1),

u(tx + (1 − t)y ) < tu(x) + (1 − t)u(y ).

Proposition
Convex ⇒ quasiconvex; strictly convex ⇒ strictly quasiconvex.

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Example
Consider f : R → R, then f is a convex function in an open interval (a, b) ⊆ R if
and only if f 00 (x) ≥ 0 for all x ∈ (a, b). f is strictly convex in (a, b) if f 00 (x) > 0
for all x ∈ (a, b).

f (x) = x 2 ⇒ f 00 (x) = 2 > 0.

f (x) = x 3 ⇒ f 00 (x) = 6x > 0 for x > 0.

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How to determine a function f : R n → R is concave, convex, strictly concave
or strictly convex?

To figure out this question, we first need to know what it means for convexity
and concavity.

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Concavity: following the tangent line, the value increases faster than f , and
decreases slower than f .

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Recall that for x, t ∈ R n ,

df d 2f
f (x + t) = f (x) + · t + kt T · 2 · t + ...
dx dx
df
Hence, in order for f (x) + dx · t to be always above f (x + t) for any t, we
might want
d 2f
tT · · t ≤ 0, ∀t.
dx 2
2
The matrix A = [ ∂x∂i ∂x
f
j
]i,j satisfies the above condition is called negative
semi-definite.

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Definition
A is negative semi-definite if t T · A · t ≤ 0, ∀t ∈ R n ;
A is positive semi-definite if t T · A · t ≥ 0, ∀t ∈ R n ;
A is negative definite if t T · A · t < 0, ∀t 6= 0;
A is positive definite if t T · A · t > 0, ∀t 6= 0.

Note: since t T · A · t > (=, <) 0 if and only if t T · AT · t > (=, <) 0, we only
need to check the property for A + AT , since it is symmetric (Ai,j = Aj,i ).

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Criterion 1: Determinant

We only talk about positive definite and positive semi-definite.

For any matrix An×n , let Am×m|n×n be its leading m × m sub-matrix.

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Criterion 1: Determinant

Theorem
If An×n is symmetric, then A is positive (semi-) definite if and only if for each
m ≤ n, the determinant of Am×m|n×n is (positive) non-negative.

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Criterion 2: Diagonally Dominant
Definition
A symmetric matrix A is diagonally dominant if for each i ∈ {1, ..., n},
X
|ai,i | ≥ |ai,j |.
j6=i

A is strictly diagonally dominant if for each i ∈ {1, ..., n},

X
|ai,i | > |ai,j |.
j6=i

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Criterion 2: Diagonally Dominant

Theorem
Consider a matrix An×n that is symmetric. If A is diagonally dominant and
ai,i ≥ 0 for each i, then An×n is positive semi-definite; if A is strictly diagonally
dominant and ai,i > 0 for each i, then An×n is positive definite.

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Convexity

2
If [ ∂x∂i ∂x
f
j
]i,j is positive definite in an open neighborhood O, then f is strictly
convex in O.
2
If [ ∂x∂i ∂x
f
j
]i,j is positive semi-definite in an open neighborhood O, then f is
convex in O.

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Convexity and Optimization
Definition
A point x in a convex set A is called an extreme point if there exists no y , z ∈ A
such that x 6= y , x 6= z and x = αy + (1 − α)z for some α ∈ (0, 1).

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Convexity and Optimization

Theorem
If u is strictly convex in a convex set A, then any x ∈ A that is not an extreme
point cannot maximize u in A.

Proof.
If x is not an extreme point, then there is y , z 6= x in A and α ∈ (0, 1) such
that x = αy + (1 − α)z.
We have u(x) < αu(y ) + (1 − α)u(z). Either u(y ) > u(x) or u(z) > u(x).

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Example
A consumer’s utility function is u(x1 , x2 , x3 ) = x12 + x22 + x32 . The secord-order
differentiation matrix is positive definite for all x ∈ R 3 . Hence, the optimization
for any prices must be either x or y or z in the graph.

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Example
A consumer’s utility function is u(x1 , x2 , x3 ) = x13 + x23 + x33 . The secord-order
3
differentiation matrix is positive definite for all x ∈ R++ but not including the
boundary, what should we do?

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First, we only need to make sure that the function is strictly convex in the
target area that we care.
Second, when necessary, we can change the target function: e.g., when we
study the region x1 = 0, why not directly work with the function
v (x2 , x3 ) = x23 + x33 ?

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