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Recursive Utility and the Solution to the Bellman Equation

Masayuki Yao
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Masayuki Yao: Research Associate (Non-tenured), Department of Economics, Keio University

No DP2016-08, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: This study infinite-horizon deterministic dynamic programming problems based on recursive utility in discrete time. Under a small number of conditions, we show that the Bellman operator has a fixed point using Knaster-Tarski's fixed point theorem. We also show the fixed point of the Bellman operator can be computed by iteration from the initial function between the lower boundary and the fixed point. To show the convergence theorem, we use Tarski-Kantorovitch's fixed point theorem.

Keywords: Recursive utility; Fixed point theorem; Dynamic programming; Bellman equation (search for similar items in EconPapers)
JEL-codes: C61 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-gro and nep-upt
Date: 2016-02
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http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2016-08.pdf First version, 2016 (application/pdf)

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