Convex dynamic programming with (bounded) recursive utility

Bloise, G. and Vailakis, Y. (2018) Convex dynamic programming with (bounded) recursive utility. Journal of Economic Theory, 173, pp. 118-141. (doi: 10.1016/j.jet.2017.10.008)

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We consider convex dynamic programs with general (bounded) recursive utilities. The Contraction Mapping Theorem fails when the utility aggregator does not obey any discounting property. This failure occurs even with traditional aggregators and certainty equivalent specifications. However, the Bellman operator admits a unique fixed point when an interior policy is feasible. This happens because utility values are unique at interior consumption plans and, when an interior perturbation is feasible, drops in utility values can be avoided.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Vailakis, Professor Yiannis
Authors: Bloise, G., and Vailakis, Y.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of Economic Theory
ISSN (Online):1095-7235
Published Online:02 November 2017
Copyright Holders:Copyright © 2017 Elsevier Inc.
First Published:First published in Journal of Economic Theory 173:118-141
Publisher Policy:Reproduced in accordance with the copyright policy of the publisher

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