Sensitivity Analysis of Cost Coefficient Estimates: The Case of Linear Decision Rules for Employment and Production

Abstract

This paper considers the consequences of errors in the cost function which underlies linear decision rules generally and in particular those developed by Holt, c.s., for the paint factory case. By differentiating the decision rules with respect to the various cost coefficients expressions for the decision errors due to errors in the cost function are obtained. First-period decision errors corresponding to a one per cent error in each of the cost coefficients are given numerically, together with first-period losses. Only infinite horizons are considered.

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