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September 29th, 2013, 01:22 PM   #1
Joined: Sep 2013

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Lagrangian Multiplier

Hi everyone,

I am trying to solve the following maximization problem:

where S is the support of b and y, and f() is the joint distribution of b and y. p is the price for a combination b,y and a is the proportion of b,y (so a()*f() is the total number for each b,y combination).

The solution states that assuming we have an optimal , we can pointwise maximize over forming a Lagrangian taking both constraints into account and obtain:

where apparently is the Lagrange multiplier of the second constraint. I have not provided too many details on the meaning of the variables, please let me know if you need additional information.

I am thankful for any ideas, this should be pretty straightforward but I could not figure this out for quite a while now.

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