Differentiability of the value function and Euler equation in non-concave discrete-time stochastic dynamic programming

Juan Pablo Rincón-Zapatero

Economic Theory Bulletin, 2020, vol. 8, issue 1, No 6, 79-88

Abstract: Abstract We consider a stochastic, non-concave dynamic programming problem admitting interior solutions and prove, under mild conditions, that the expected value function is differentiable along optimal paths. This property allows us to obtain rigorously the Euler equation as a necessary condition of optimality for this class of problems.

Keywords: Dynamic programming; Euler equation; Envelope Theorem (search for similar items in EconPapers)
JEL-codes: C60 C61 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s40505-019-00166-4

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