REDUCED COST-FUNCTIONS AND THEIR APPLICATIONS

Reduced cost functions, introduced by the author in the context of the general mass transfer problem, have proved to be useful in some econo mic applications, In the present paper the properties of such function s and closely related sets Q(0)(c) = {u: X --> R-1: u(x) - u(y) less t han or equal to c(x, y)(x, y epsilon X)} are examined in a more genera l setting than before, Three applications to mathematical economics ar e then considered, viz demand theory, rationalizability of action prof iles in a principal-agent framework, and optimality of trajectories in dynamic optimization problems.