For nonlinear models, the Lagrange multipliers are only approximate indicators of shadow prices.

Question

Quizplus · Accepted Answer

Lagrange multipliers can only provide approximate estimates of shadow prices in nonlinear models because they are based on the assumption of small changes in the constraints and objective function, which may not hold true in nonlinear cases. Additionally, the existence of multiple local optima in nonlinear models can make it difficult to determine the true shadow price.

For Nonlinear Models, the Lagrange Multipliers Are Only Approximate Indicators