Dixit-Stiglitz function

Definition

Economics

  • Really just a symmetric CES function, the innovation of Dixit and Stiglitz (1977) (and earlier Spence (1976)) was to allow the number of arguments to be variable. Used originally as a utility function, withelasticity of substitution greater than one the function displays a preference for variety. Used as a component of a production function, the same property implies that costs fall with variety. Also called theSpence-Dixit-Stiglitz function.
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