Dixit-Stiglitz function



  • 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.