Optimal dividend payments in the stochastic Ramsey model

Hiroaki Morimoto

Stochastic Processes and their Applications, 2010, vol. 120, issue 4, 427-441

Abstract: We consider the dividend payments of a self-financing firm in the stochastic Ramsey model. The firm invests in capital stock and its production technology is given by the Cobb-Douglas function. Our objective is to maximize the expected present value of future real dividends subject to a positive constraint on the capital stock. We use the penalization method to obtain a solution for the variational inequality associated with the optimal growth problem and give a synthesis of the optimal dividend policy.

Keywords: Dividend; Variational; inequality; Viscosity; solutions; Singular; control (search for similar items in EconPapers)
Date: 2010
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