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STICERD Economic Theory Seminars

A General and Intuitive Envelope Theorem

Andrew Clausen (Edinburgh University)

Thursday 05 March 2015 15:30 - 17:00

32L 3.05, 3rd Floor Conference Room, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH

Many of our seminars and public events this year will continue as online seminars or as online and in person. Please check our website listings and Twitter feed @STICERD_LSE for updates.

About this event

Previous envelope theorems establish differentiability of value functions or policy functions only. Our envelope theorem applies to all functions whose derivatives appear in first-order conditions. For example, in Stackelberg games, the leader's first-order condition involves the derivative of the follower's policy. Similarly, we differentiate (i) the borrower's value function and default cut-off policy function in an unsecured credit economy, (ii) the firm's value function in a capital adjustment problem with fixed costs, and (iii) the households' value functions in an informal insurance economy. Our theorem accommodates optimization problems involving discrete choices, infinite horizon dynamic programming, and Inada conditions.

Economic Theory Seminars are held on Thursdays in term time at 15:30-17:00, ONLINE or ONLINE AND IN PERSON at the same time.

Seminar organisers: Dr Andrew Ellis and Dr Francesco Nava.

For further information please contact Annie-Rose Nicholas by email:

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This event will take place in 32L 3.05, 3rd Floor Conference Room, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH. The building is labelled on the map.

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