SOME ENVELOPE THEOREMS FOR INTEGER AND DISCRETE-CHOICE VARIABLES

The envelope theorem is a genuine workhorse of economic analysis. Typi cally, this theorem requires that the choice variables be continuous. This paper derives envelope theorems, previously unavailable in the li terature, for use with integer and discrete choice variables. Our resu lts, which are intuitive, thus make it possible to use the envelope th eorem in a variety of analyses in which the natural description of cho ice variables is not continuous. Among such choice variables are the n umber of projects, plants, and a couple's children, as well as binary (yes-no) choices such as labor-force participation, home ownership, an d migration.