Non-constant discounting in finite horizon: The free terminal time case

Jesus Marin-Solano and Jorge Navas

Journal of Economic Dynamics and Control, 2009, vol. 33, issue 3, 666-675

Abstract: This paper derives the HJB (Hamilton-Jacobi-Bellman) equation for sophisticated agents in a finite horizon dynamic optimization problem with non-constant discounting in a continuous setting, by using a dynamic programming approach. Special attention is paid to the case of free terminal time. Strotz's model (a cake-eating problem of a non-renewable resource with non-constant discounting) is revisited. A consumption-saving model is used to illustrate the results in the free terminal time case.

Keywords: Non-constant; discounting; Naive; and; sophisticated; agents; Free; terminal; time (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (22)

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Working Paper: Non-constant discounting in finite horizon: The free terminal time case (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:33:y:2009:i:3:p:666-675

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