Mathematical Appendix I.

Kuhn-Tucker Theorems

I.1 Constrained Maximization: Necessary Conditions.

n
Function F : IR+ → IR is the objective function; functions g j : IR+
n
→

IR, for j = 1, . . . , k, are constraint functions. Assume that F and g j are

∂F ∂g j
differentiable, with partial derivatives ∂xi and ∂xi denoted by ∂i F and ∂i g j ,

respectively.

The constrained maximization problem (with nonnegativity constraints) is

max F (x) (1)

x

subject to g 1 (x) ≥ 0,

......,

g k (x) ≥ 0,

x1 ≥ 0, . . . , xn ≥ 0.

We write the Lagrangian as

X
k
k
1
L(λ , . . . , λ , x) = F (x) + λj g j (x),
j=1

where λj ≥ 0, for j = 1, . . . , k, are the Lagrange multipliers. We use λ to

denote the k-vector of multipliers.

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Kuhn-Tucker conditions for x∗ ≥ 0 and λ∗ ≥ 0 are:

for all i = 1, . . . , n and j = 1, . . . , k,

X
k
∂i F (x ) +
∗
λ∗j ∂i g j (x∗ ) ≤ 0, and if x∗i > 0, then “ = 0”, (2a)
j=1

g j (x∗ ) ≥ 0, and if λ∗j > 0, then “ = 0”. (2b)

Where do these conditions come from? Think about maximizing La-

grangian L(λ, x) with respect to x and minimizing it with respect to λ, un-

constrained, except for x ≥ 0 and λ ≥ 0. This is the saddle-point. K-T

conditions (2) are FOCs for such max-min (or saddle-point) problem.

Theorem (Kuhn-Tucker): If x∗ ≥ 0 is a solution to the constrained maxi-

mization problem, and the Constraint Qualification Condition holds, then x∗

and some λ∗ ≥ 0 satisfy K-T conditions (2).

Constraint Qualification Condition:

(i) Kuhn-Tucker original – don’t touch it.

(ii) g j concave for all j, and Slater’s condition, that is, there is some

x0 ≥ 0 with g j (x0 ) > 0 for all j.

(iii) rank condition (see Takayama 1.D.4, or Varian, ch 27),

(iv) g j linear for all j, (Arrow-Hurwicz-Uzawa, see Takayama 1.D.4)

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I.2 Sufficiency of Kuhn-Tucker Conditions.

The most standard theorem is:

Theorem S1: Suppose that F and g 1 , . . . , g k are all concave functions. If

x∗ ≥ 0 and λ∗ ≥ 0 satisfy K-T conditions (2), then x∗ is a solution to the

constrained maximization problem.

A better theorem is due to Arrow and Enthoven (1961).

Theorem S2: Suppose that F and g 1 , . . . , g k are all quasi-concave functions

and some “mild” condition holds. If x∗ ≥ 0 and λ∗ ≥ 0 satisfy K-T conditions

(2), then x∗ is a solution to the constrained maximization problem.

The extra (“mild”) condition is not needed if F is concave (and g 1 , . . . , g k are

quasi-concave). See Takayama 1.E for three versions of the condition.

Quasi-concavity (and therefore also concavity) of functions g j implies that

the constraint set, i.e. the set of x ≥ 0 satisfying g 1 (x) ≥ 0, . . . , g k (x) ≥ 0, is

convex.

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I.3 Constrained Minimization

The constrained minimization problem (with nonnegativity constraints) is

min F (x) (3)

x

subject to g 1 (x) ≤ 0, . . . , g k (x) ≤ 0,

x1 ≥ 0, . . . , xn ≥ 0.

The Lagrangian is
X
k
L(λ, x) = F (x) + λj g j (x).
j=1

Kuhn-Tucker conditions for x∗ ≥ 0 and λ∗ ≥ 0 are,

for all i = 1, . . . , n and j = 1, . . . , k,

X
k
∂i F (x ) +
∗
λ∗j ∂i g j (x∗ ) ≥ 0, and if x∗i > 0, then “ = 0”, (4a)
j=1

g j (x∗ ) ≤ 0, and if λ∗j > 0, then “ = 0”. (4b)

The corresponding saddle-point problem is to minimize Lagrangian L(λ, x)

with respect to x and maximize it with respect to λ for x ≥ 0 and λ ≥ 0.

The Kuhn-Tucker Theorem holds with no change for the constrained mini-

mization problem. However, in constraint qualification conditions concavity

of functions g j , if present, has to be replaced by their convexity. This guaran-

tees convexity of the constraint set described here by inequalities g j (x) ≤ 0.

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Theorems S1 and S2 continue to hold with concavity (quasi-concavity) of

functions F and g j replaced by their convexity (quasi-convexity, respectively).

I.4 Remarks:

• Applications of K-T theorems in microeconomics:

(i) Consumer theory: utility maximization subject to budget constraint,

and expenditure minimization.

(ii) Welfare economics: Characterization of Pareto optimal allocations as

solutions to maximization of a welfare function subject to resource con-

straints, or maximization of one agent’s utility subject to constraints on

other agents’ utilities and resource constraints.

(iii) Producer theory: cost minimization.

• There are versions of K-T theorems for maximization and minimization

with mixed constraints, i.e., when some constraints are of the equality form,

g j (x) = 0. See Sundaram [2], Section 6.4.

• K-T theorems hold for local maxima (minima) as well.

References: [1] Takayama (1995), 1.D and 1.E. [2] Sundaram (1999), Chap-

ter 6. [3] Varian, ch 27. [4] MasColell et al. Warning: Takayama [1] and

Sundaram [2] do not explicitly write nonnegativity constraints x ≥ 0. Varian

[3] writes constraints in the maximization problem as g j (x) ≤ 0.

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I.5 Example: Consider the following constrained maximization problem:

maximize ln(x1 + 1) + ln(x2 + 1)

subject to p1 x1 + p2 x2 ≤ m

x1 ≥ 0, x2 ≥ 0,

where p1 > 0, p2 > 0 and m > 0.

In order to derive the solution (as a function of parameters p1 , p2 and m) we

write the Kuhn-Tucker first-order conditions (2) as

1
(1) − λ∗ p1 ≤ 0, and if x∗1 > 0, then “= 0”.
x∗1 +1
1
(2) − λ∗ p2 ≤ 0, and if x∗2 > 0, then “= 0”.
x∗2 +1

(3) p1 x∗1 + p2 x∗2 ≤ m, and if λ∗ > 0, then “= 0”.

with x∗ ≥ 0 and λ∗ ≥ 0.

Note that (3) holds with equality since it follows from (1) that λ∗ > 0.

We solve inequalities (1-3) by considering cases:

Case 1. x∗1 > 0, x∗2 > 0.

Then (1) and (2) hold with equalities. Solving (1), (2) and (3) we find x∗1 =
m + p2 − p1 m + p1 − p2 2
and x∗2 = and λ∗ = . For x∗1 and x∗2 to
2p1 2p2 m + p1 + p2
be strictly positive, it has to be that m + p2 > p1 and m + p1 > p2 . Thus

Case 1 applies with x∗1 and x∗2 as listed above if m + p2 > p1 and m + p1 > p2 .

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Case 2. x∗1 > 0, x∗2 = 0.

m
(3) implies that x∗1 = . Since (1) holds with equality, we solve it for
p1
1
λ∗ = . Next we need to verify inequality (2). It states
m + p1

p2
1− ≤ 0,
m + p1

m ∗
and it holds if p2 ≥ m + p1 . Thus Case 2 applies (with x∗1 = , x = 0) if
p1 2
p2 ≥ m + p1 .

Case 3. x∗1 = 0, x∗2 > 0.

m
This case is very similar to Case 2. From (3) and (2) we obtain x∗1 = ,
p2
1
λ∗ = . Verifying inequality (1), we obtain p1 ≥ m + p2 . Thus Case 3
m + p2
m
applies (with x∗1 = 0, x∗2 = ) if p1 ≥ m + p2 .
p2

The case x∗1 = x∗2 = 0 cannot hold since it violates equation (3). This con-

cludes our solution to the K-T conditions.

Since utility function is concave and the constraint function is concave (in

fact, it is linear) K − T conditions are sufficient (Theorem S1). Hence, the

solution to K-T conditions is a constrained maximizer. Further, since the

Slater’s condition holds, every constrained maximizer has to satisfy K − T

conditions.