PART 3 COMPARATIVE STATIC

2916127
ANALYSIS

CHAPTER G COMPARATIVE STATIC AND

THE CONCEPT OF DERIVATIVE

This Ch 7 and I will be devoted to the methods of comparative static analysis

G 1The Nature a Comparative Statics

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Comparative statics concerns the comparison or different sets or values or Parameters and exogenous
variablesFor such purposes we assume a position a equilibrium denoted by and we let
diseauilibriating changes occur in the form of a change in the exogenous parameters whish will lead
to a new set of endogenous variables Our Question is men how does his new eauilibrium
compares with the old

It should be noted that we'll disregard the adjustment process i e we'll just compare the
initialCPrechangel and final Postchange eauilibrium We'll also assume stability or he eavilibrium
i e its always attainable

Comparative statics can be Quantitative and Qualitative in nature When we want to analyse only the
direction of the change we cansay that in Qualitativebut ie we want to analyse the magnitude or
the change then its Quantitative Although by analysing the magnitude we always obtain the sign
hence the Quantitative analysis will always embrace me Qualitative

Because we are essentially trying to find the rate of change that of me endogenous in respect to

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a change in the exogenous the concept of derivative the most fundamental in differential
Calculus

6.2 Rate a Change and he Derivative

We can extend our discussion from the equilibrium values in a model to a more general las

by considering the rate of change a y in response to a change in x related by the unction

Y FCK
Applied to a comparative static context y is the endogenous while x will be some parameter
We'll first discuss the case of a single parameter and then we'll extend the case to more

The Diecerence Quotient

A special symbol is needed to represent the rate of change I will be used to denote the
difference he change of x xo i.e A Xi Xo

We'll also need way a denoting the value of text at various values a X The standard
a
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practice is to use fail to represent text when x Xi so f x 5 txt 5107 5 0 fell
5 22 etc

When x changes from Xo to a new valve exo tax the value of the function Y fix
Changes from fool to foot Ax The avg change inY per unit of change in X can berepresented
by the difference Quotient
Sexo tax faxon
It Ax
16.17

i e Ay Ax is a function of xo and Ax

ÉYf fax 3 2
4 we can write
fexol 31 012 4 f xo tax 7 3 exo TAXI 4
Therefore the difference Quotient is

340 1 42 13 02 Gi
14 tae
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 Gro t 3 Ax 16.27
So given to 3 and Ax 4 then the avg rate of change is 653773947 30 Thismeans
hat on the average as x changes from 3 to 7 the change in Y is 30 unit I change in x

The Derivative
Frequently we're interested in the rate a change of y when Ax is very small What we can
do hen is drop Ax entirely to get an approximation a Yax which will be more accurate the smaller

the Axis So in 6.2 Got 3Ax will be Gxo symholiially lax 76 0 ee Ax 70 or by the equation

CGXo t 31 7 6 0 16.3 note that this is saying

infoFI
ax when x is approaching Tero
Isffmattim'it but never e wally reachester
k me is named mederivative or me anction 4 547

Several points should be noted about the derivative if it exists

First a derivative is a function its derived from theprimitive function fax Whereas the diererence

Quotient is a tuition of Xo and Ax the derivative is only a function or xo as in 6.3 es Ax

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is disregarded We also odd hat to is used to stress that thechange in X must start from some
value x Now hats his understood we'll delete the o and just state that huderivative is a function a x

Third because he rate a change envisaged is infinitely small lie Ax 707 the rate measured by
thederivative is in the none a an instantaneous rate of change

Fourh theres also a matter of notation whim we'll use either f x or 8

sext

6.3 The Derivative and the slope or a Curve

A basic econ concept is mat given a total lost nation É s the marginal cost CMC is
defined as the change in total lost resulting from a unit increase in output i.e Mc TAQ

Its understood that AQ is extremely small In the case a Q hats discrete thesmallest change is 1
but win Q mats a continuous variablethis can be an infinitesimal change In his latter ice its

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Well known that the Mc can be measured by the slope or the TC curve But theslope or the TC
curve is just the limit of 4Ad when a 70 so his is related to the concert or the derivative

We have drawn the toki cost curve C 5 97

Suppose Qo is he initial output level men the
relevant point is A If output is raised to
Got AG Q2 TC will be Cot AC Cz Mus
AC Aa 42 Co Caz Gol

Geometrically his is the ratio a EB AE or

the slope of the line segment AB This particular

ratio measures an avg rate of change the
avg MC for the particular All

Say we want smaller AQ Go to ai then the avg Mc will bemeasured by the slope AD
instead Moreover as we reduce it further line in the limit AQ 70 we obtain KG which
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is the me tangent line at Point A

The slope a KG hen measures the slope or the TC curve at A andrepresents the limit
of AC AQ as AQ 70 whish is basically f cool When hisinitial output moves to 92 men
we will find the derivative at point B which is f Caz

6.4 The Concept or limit

dy dx has been defined as the limit of the difference Quotient 114 Ax as Ax 70 If we adopt

9 14 AX Ca earQuotient and VE Ax variation in Xl we have

ima
a V 70

As thederivative relies heavily on the notion of limit its important to have a stronggrasp on it

Left Side Limit and Right Side Limit are

The concept of limit is concerned win theidea a how one variable approaches as an omer

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variable approaches a specific valve In order for his to make sense q must be a function of

u say q gout Our immediate interest is finding the limit of q as u so

tie
We can extend his easily to finding the limit of q in the more general case a V 7N

From his view Into is simply a case where N o we'll also discuss the limit of a as
v to or X

When we say V 7N u can approach N from two sides If V approaches N from values
less man N a approaches a finite number from me leetside limit of q On theotherhand
it V is approaching from values greater man N hen we can l he right side limit a g

The left side limit is symbolised by Itv 9 while his right side limit is visit9 let
the two limits have a common value say l we consider the limit a g to exist and write
it as tiff L where l is a finite number The left and right side may not be eaval

When I L Cor andrewstudynotes.com

say han g has no limit as theres no boundary u
D we shall

how much q can increase its also said to have an infinite limit

In certain cases only one side needs to be considered such as only the left side when
III to Similarly win D from me right side A isnt a number so it cant be operated
on algebrai tally

Graphical Illustrations
lets illustrate several dieverent situations regarding the limit of a function q g cul

Fig G La shows a smooth curve as he variable u tends to approach the value or N from
either side of the hovinontas axis he left and right side limits are identical thus we can write
into c

Infig 6.26 it has a sharp turning point but nonmeless as u tends to N fromeitherside g

again tends to the identical L the limit or q again exists and is equal to c

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 Fig 6.2C is known as a step function As utends

to N the leet side limit is Li and the right side

is L2 Hence g doesnt have a limit as v on

lastly in d as u tends to N me left side limit

of q is D while he right side is to because

the two parts a the curve will fall and rise

indisinitely III doesnt exist

k we consider a dirrerent sort a limit namely

iffy then only he left side has relevance and
we do rind thatlimit to exist 17 0 M Similar
lima
idea is also for u s o M

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We can apply the right and test side concepts to Mc in Fig 6.1 q refers to AC AQ and
u the magnitude of HQ with all changes measured from
A

Inother words 9 will measures the slope a lines such

as AB AD and KG whereas v refers to the length
of such lines as QoQz C AE and AF

We've seen that as u approaches zero from a positive

value q will approach a valve e dual to the slope of
line KG Similarly we can establish that as AQ
approcines zero from a negative value i.e as the decrease in output is less and less the Quotient
ACAQ Cs measured
by the slope RA will also approach the stone of KG

Indeed this is similarto that in

fig G za the slope or k 6 the counterpart of L in 6 za is

the limit of me Quotient 9 as v tends to zero and such it gives us the MC at Q Qo

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Evaluation or a limit
lets now algebraically illustrate the algebraic evaluation of a given function g gcu

t.IT tur find im To tone he leet side limit we substitute me series or negative valves
I to too for u and find hat 2t o
will decrease steadily and approach 2C as u
approaches zero The same idea applies for the right side limit Thus he limit or a exists and we

write 19 2

Dont see the answer as setting v o in evaluating q we're

letting u n but as a rule dont
let V N We can speak or the limit of a as U 7N even if N isnt in the domain of the unction
q gcu

Example 2
Given
g 1 v2 I v7 find 19 Here Nel isnt in the domain and we cant set v o as

it would involve division by zero Moreover wecant use the method in Ex I as it would
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involve me denominator approaching hero as V 71

One way to solve his is to not include u in me denominator since u 71 implies that vet

So mat CU 17 is to its legitimate to divide 1 V2 by Itu and write

if Itv cutis

In this new expression heres no longer u in the denominator since Itv 72 as v 21

1
Iim ride we can conclude that 9 2

É n 2ut5 cute find Instoo The variable u appears in bohn the numerator and
denominator mus the result will be a ratio or an infinitely largenumber which wont have any

useful meaning We can sidestep his by transforming into a form in which his variable u want
appear in the numerator

This can be achieved 20 5 isnt evenly divisible

by dividing the given ratio sin ie bySutil
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the result will contain a remainder as follows
2 2
9
7 37
3016122
tsk as u s to we can conclude man u c
4
17 51 17 47

There are some user theorems in evaluating limits which will be discussed in Sea 6.6

Formal View of the limit Concept aline

gon
We can utilise the concept a neighborhood of a point to provide a more precise definition of
the limit concept

For a given number L there are always L ai C L and tail 72 where a an

az are some arbitrary positive numbers The set co all numbers falling between CL an and
Itar is called the interval between those two numbers

If L a and tan are included in the set its a closed interval it theyre excluded
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then its an open interval

A closed interval between CL ai and far is denoted by he bracketed expression

L ai Lta all ai sa e tan

and the corresponding open interval is denoted win parentheses

L ai Ltar 91 L a get tar 64

So C is he weak inequality e while C is he strict inequality c but the smaller
L all is always listed first later we'll also discuss half open and half closed intervals
such Cs 3,5 and 6 07 whith have the following meanings
3,53 132 55 6 D XI 6 Ex E N

Now we
may define a neighborhood a L to be an open interval as defined in 6 4 whim
is an interval covering the number L Depending on the magnitudes the arbitrary co a and
an it possible to construct various neighborhoods for the given number C The limit or a function

may men be defined as follows

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 As u N the limit a 9 90 is he number L.ie for every
neighborhood a L that can be chosen however small there can be

found a lorresponding neighborhood of NCexcluding v N in the domain

cc the function such hot for every value a u in hat N neighborhood
in image lies in the chosen L neighborhood

To illustrate the statement consider Tig 6.3 resembling big 6 La which we know mat
lift 9 L in Fig 6.3 lets see hat wirills he new decinition a a limit

First select an arbitrary small neighborhood cc C say L an tan this should be

way smaller but its his way as an illustration

Now constr it a neighborhood N say N bi Nt b2 such that the two neighborhoods

when extended to quadrant 1 make a rectangle win two of its corners lying on the given
curve Itcan be verified hat for every valve v in his neighborhood a N except v N me
lorresponding valve a q gculies in the chosen neighborhood a L
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No matter how small an L neighborhood

we choose the correspondingly small

N neighborhood can be round win the
property just cited

We can then apply this to me step function in fig 6.2C to show hat neither 4 or L2
Qualities as Ifv 9 If we choose a very small neighborhood of Li no matter what
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neighborhood we choose for N the rectangle associated with the twoneighborhoods cant
Possibly enclose the lower step of theauction
39 one

Consequently For any values v N the corresponding

smh like his I think wold break
as it
L cantgo to Lu neighborhood a q want be in the neighborhood co Li
me delinition
and mus 4 rails the test for a limit similarly we

g can dismiss z tuns heres no limit for 9 as v 7N

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We can show his algebraically as well consider

9 HU CUI 16.57
1 1

We've found hal 17 9 2 So we have Nil and L2 To demonstrate mat the limit is indeed
2 we must demonstrate hat for every chosen neighborhood or L 2 ai 2792 there exists

a neighborhood co N CI bi It be such hot whenever u is in the neighborhood a N q mustbe

in my chosen neighborhood or L

Essentially For he given values of a and an however small two numbers bi and be must be

Found such hot whenever the ineauality

I bi c ve it be cut 1 16.6
is satisfied anomer inequality of the room
2 a Cq c z tar 16.7
must also be satisfied To findsuch a pair a bi and be rewrite 6.7bysubstituting c 5

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 2 a c I tu c 2 tar 6.7
Transforming
by subtracting I from each side into the inequality
l ai c u altar 6.7
Comparing 6.7 with 6.6 hat ie we choose be a and b2 92 the two inequalities will
suggests

always be solved simultaneously Thus the neighborhood of N Cl by I that as reauired by me

definition of a limit is indeed 1 2 which establishes it as the limit

Now
say we choose another valve say 3 to show hat it cant Qualing es 119 for the
function in 6.5 12 3 were hat limit it would have to be true hat for every chosen neighborhood
of 3 CJ ai Star there exists a neighborhood a 1 CI bi It be such that whenever
v is in the latter neighborhood g must be in the former neighborhood i.e whenever
I bi c u c I tbr
is satisfied another inequality in the form of
3 a CI tu c 3 far
or 2 a cu c 2 tar
must also be satistied
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The only way to achieve his result is to choose bi an i and bz art 1 This would
imply that the neighborhood or I is to be the open interval C2 ai 21227

According to thedefinition a and ar ian be arbitrarily small

say ai saz o 1 The last

mentioned open interval wouldthen be Cl g 2.1 which lies entirely to the right er the
Point V l on the horizontal axis and mus doesnt even Qualify as a neighborhood or l

Thus he derinition limit cant be satisfied by 3 me similar procedure can be made

or a to

show mat only 2 sits his definition In general it a limit exists then its unique

65 Digression on Inequalities and Absolute Values

We'll discuss some rules of operations generally applicable to ineaualines

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Rules a theavalities

lets state an important property or ineaualities they are transitive meaning hat ie a b and
b i men c 1 Since equalities are also transitive his property should apply to weak
inequalities as well So we have
a b b c a c
a 2b b 3C a 2C

This property allows the writing or a continued inequality such as 3 ca e b 8 or 7 EXE 24

In writing continued ineauality he signs are arranged in the same direction usually with me smaller
number on the leet

Here are some rules in regards win operations on inequality

IYI fd.it nid tni aIii subtracted mom each side Generalising me

rule we have it a b c then at h s b Ik o CI k

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RueIcmoinnitationgjaisqua kb Choo
ka c Kb Uco

The multiplication of both sides by a positive number Preserves he ineauality while a negativenumber
reverses the inequality Division is eaval to multiplying by m number in

RuletIssaucring a b b 207 7 a b

Ir in two sides are positive the ineauality will hold when both sides are squared

Absolute Valves and Inequalities

When he domain co a variable x is an open intervalcarb thedomain
may be denoted bythe
set x I a ex ab or simply a cxcb.la its a closed interval Ca b it may be expressed
as a Ex sb

In the speical case of an interval or the form C a al

say C lo lo it may be represented
either by 10 C X C 10 or
by I XI C 10
absolute numerical value
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For any real number n the absolute value or n is defined as follows
n Cir n o
int n cir nco 68
0 Cia no

Note that ie n 15 then1151 15 but ie n 15 we find

1 151 C 157 15
Thus he absolute value or any real number is simply its numerical value without its sign
The absolute value co n is also called the modulus or n

Given 1 1 10 G d Mar x must be either 10

we may conclude from or 10 Similarly
IXIC to means hat I it x 10 then x
lx Clo so hav x must be less than 10 but
also il X CO men according to 6.8 we have XIX c lo or x 10 so that x must
be greater than lo

Hence
by tombining two parts co his result we see that x must lies within the open interval
C to lol In general
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Ixion co nexon on o
which can be extended to weak inequalities
Ix En e nexen enzo 6.107

The absolute values or two numbers can be operated on the following Properties characterise hem

lmltlnlzlmtnl­lml.int
Im.nl

Yi 121
The first of these involves inequality rather than an equation The reason is whereas he
left hand expression lml tht is definitely the sum of two values bom are positive Im tht
is the numerical value a either a sum C it m and n are say both positive or a difference
ie m and n have opposite signs Thus he left side may exceed the right side

Example 3

te m 5 and n 3 then lml t int Im th1 8 But it m 5 and n 3 then lml tint P where
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 Im th I 15 31 2

fasmailer number

In the lase or the other two properties the signs dont matter in taking the absolute value of
the Product or Quotient

É mi and ma hun its me same with me 7 and n d

Iml In 1 1 71 181 7687 56
Im on 1 1 7 8 1 7681 56

Solution a an Ineduality
Its similar to an equation where it its exist its the set of values x which make the inequality
a true statement

Eightfsourion andrewstudynotes.com
a
ex s xt
collecting the terms by adding 13 x to both sides
2 7 4

multiplying both sides by t

X 72

We can thus express the solution as the set x1 x 23 or as the open interval 2.07

É x1 es First get rid of me absolute value notationusing 6.10

3 I 1 X E3
Subtracting I crooneach side
U E X E2

multiplying each side by C 17

42 X 3 2

Where the sense of inequality has been reversed writing the small number first we can write

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 2 E x EY
or as x 1 2 E x e4 or he closed interval C 2.4

6.6 Limit Theorem

Our interest in the rate of change leads us to consider derivative which as its essentially in the
nature of the limit of a difference Quotient Prompt us to study and evaluate a limit

Thebasin process or limit evaluation involves letting the variable u approach a particular number

and observing the valve hat 9 approaches We can draw a number or limit theorems to ease
the Process of evaluating a limit especially eor complicated unctions

Theorems Involving a Single function

When a single function g

g cu is involved the following
theorems are applicable

Theorem I
le g auf b then Itn 9 a Ntbandrewstudynotes.com

Given 9 5017 then 1329 56171 7 17

Theorem I
k q gcu b then lift 9 b
Its just saying that the limit of a constant an iron is the constant in that unction This is just
the specialcase of a 0

I t's.am
9 uh hen Jinn9 Nh
Given 9 03 we have 129 8

Theorems Involving Two Functions

If have two minions of the same N v gl

we
go and guncut and if both functions
Possess limits as follows

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 fish 91 1 11192 L
where Li and Li are finite numbers then the following theorems apply

Theorem NC sum diorerence limit theorem

In Cal I 92 4th
Thelimit or a sum difference or his two nations is the sum direerence a hair limits

In Particular we note mat

fish ca It can tail L t 4 24
which is in line with Theorem I

Theorem U Product limit theorem

Ibn 91927 44
The limit or a product or two auctions is the product of their limits

Applied to me square or a function

Bn 91917 44 andrewstudynotes.com
Li
which is in line with Theorem 3

TheoremVI Quotient limit theorem

dining E Certo
te tho Itu C2 to since we have litho Itu 1 and IdoCat u 2 the limit is

Note that Li and he finite numbers while Theorem Ul reavires 22 to If houserestrictions

are

arent satissied we must rail back on the method a limit evaluation instead

Limit or a Polynomial Function

We can easilyapply me limit theorems to evaluate the limit of any polynomial 4h28 93
11717L
q g cut got an tar u t tan un G ill
as u tends to the number N Since he limits or the separate terms are respectively
Isiao a fish air ai N If azula N
the limit of his polynomial
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 6.7 Continuity and Direerentibiality or a function
The preseeding discussion a he concept a limit can now beused to definethe continuity and
differentiability or a function which bear directly on the derivative or the auction

Continuity or a function
When g gcu possesses a limit as u tends to the point N in thedomain and when his limit
is also equal to gcn i.e equal to the valve or the function at V N thefunction is said to
be continuous at N

The term continuity involves 3 reauirement

1 the point N must bein the domain or he anction i.e gon is defined
a the limit mustexist i.e Imogen
7 me limit must be naval in value to
gov Isn 907 gon

Lets apply these to me functions in G 2 In a all three requirements are met at point N

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Point N is in the domain a has he limit L
as U N and the limit L happens also to be
the value of the auction at N Thus he function
represented by hat love it continuous at N

The same is true win b whish illustrates that to

be continuous he anation doesnt have to be
necessarily smooth at V N

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When a function g
gcu is continuous at all values a u in the interval ca b its said to be
continuous in that interval le in iontinuous at all toinn in the subset S co the domain its said to be
in S Finally when its in its domain in continuous
continuous continuous at all points we say hat
in in domain

Comparing two C and D men we can see that house are discontinuous With C theres no limit.hu

violating he serond reauirement while N is excluded in the domain in the case or D It appears men
sharp points are fine while gaps arent for continuity

Polynomial and Rational Functions

We've found from 6.12 mat For
any polynomial Ifv9 exists and equal to the value a N Mus

any polynomial function is continuous in its domain

Interms of rational functions heres a theorem the continuity theorem that states the sum direerence
Product and Quotient of any actions that cue continuous in the domain are respectively also
continuous in the domain As a result any rational unction as its simply a Quotient or two
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Polynomial unctions must also be continuous in its domain

EIII.mn
a got
YI
is defined her all finite real numbers has its domain consists of the interval C D 07
For any numbers or N in the domain the limit a q is by the Quotient limit huoremi

EnamIIna
merion

artist
isnt drained at v 2 and v 2 Since the two valves a u arent in the domain he action is
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 at U l and u c despite the existence a a limit
continuous

Differentiability or a function
We've seen the tools to ascertain whether
any action has a limit as its Iv approaches some speciric
valve We can apply the limit concept and take the limit or he dircerence Quotient or her
function AY Ax as Ax approaches zero

Taking the limit of me anction Y fax idea we can in line with me previous discussion examine
whether the auction f is continuous at exo Theconditions are

Ill x xo must be in the domain of the action f

474 must have a limit as x xo

G the limit must be equal to exo

When these are satiseied we can write
Fx Fox fexol continuity condition 6.137

In contrast when the limit concept is applied to the dicoerence Quotient lax as x 70 ave mus

dealwith the Question of whether the unction f is dicoerentiable at x to i.e whether deldx exists
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at X Xo or whether f Cxol exists

Since f Xo exists ice the limit of Ax Ax exists at X Xo as Ax 70 his symbolic expression of

the diverentiability co f is
Sexo IF II
Lily fcxotff.tt direerentiability condition 16.147

These two Properties continuity and direerentibiality are related to each otherThe contuinity or t is a

necessary condition for its diererentiability although as we see later it isnt sureicientThis is
basically saying that to be dirrerentiable at x xo it must first be continuous at x xo

To Prove his we shall demonstrate that given Y sext its continuity at x xo follows from its
differentiability at X Xo i e condition 6.13 Zollows from G 14

Before his we shall simplify the notations somewhat by

Il repeating to with N and
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 47 replacing Xo tax win x

This is shown in Fig G 4 where the old notations sin brainets appear alongside the new Note hat
Ax now becomes x NT so hat At so becomes
x 7N which is similar to U S N

G B and G 14 men can be written as

If
Fox FCN 6.13

soul II 5431 16.14

What we want to showis that he continity condition 6.13 follow rum me differentiability
condition G147 First since x N implies hat x N so that x N is a montero number we canwrit

fan 6.15
fax
XIII andrewstudynotes.com
I X N

Taking the limit co eck side of 6.15 as x 7N yields the collowing results
Leet side Itv fax Iv fan difference limit theorem

ID fix f N FCN is a constant

Rightside f'D 4 11 ex N Product limit theorem

F u Iso x II N byCG.lu and diorerence limit theorem
F CNI CN N 0

Without G ly we rant write thisequation as without f in then the right side cand also he

left wouldnt possess a limit Moreover when he left side and right side result are eauated
we get ID fax f 1107 0 which is identical to 6.13

Thus we have proven hot continuity follows from diecerentiation In general ie a unction is

diereventiable at every point in its domain we may conclude that it must be continuous in its
domain

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While dicoerentiability implies confining conwinity is a necessary but insurricient for

differentiability We'll demonstrate by Providing a counterexample consider

7 Fox 1 211 1 16.16

graphed in Fig 6.5
This function isnt diecerentiable athough continuous

when x 2 Establishing its continuous is easy

First X 2 is in the domain or her auction

Second he limit or y exists as x tends to 2 speliriec

III 7 1
Third 027 L
Thus he function meets all he reauirements of

continuity

To show hat f isnt differentiable at x 7 we must show mat the limit a the diorerence Quotient
Is tuff ie T.tt IF HE
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doesnt exist which involves demonstrating the Ihs rhs limits Since in considering that
the right side limit x must 71 cerording to the absolute value definition we have 1 21 4 7
thus the right side limit is

II II 1

The leaf side limit meanwhile reauires x to beless man 2 has cicording to 6.8 7 21
x 21 Consequently the leaf side limit is
IT II It It iii cn

showing that in not dieeerentiable In conclusion all dicoerentiable auctions are continuous but not
all continuous unctions are dieoeventiable

In Fig 6.5 the nondifferentiability at X L is because the point 2 1 theres no tangent

line and hence no definite slope can be assigned to the point Specieilally to the left he
Store tends to I while to me right it tends to 1 with no tendency to approach a common

magnitude at x 7

The point 12.1 is of course special as its theonly sharp point on the curve At other Points
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the derivative is defined and the auction is derivable More specifically
D dircerentiable in c o z
left Part I 3 X X E 27

Y ti x 1 x D in 6,07
Right pay x 21 2

In general differentiability is more restrictive compared to continuity Contrinity at a pointonly

rules out the presence of a gap whereas differentiability rules out sharpness as well Thus
differentiability calls for smoothness of the action as well as its continuity
217122
2 3h16

ski

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