Stochastic Optimal Growth Model with Risk Sensitive Preferences

Nicole B\"auerle and Anna Ja\'skiewicz

Papers from arXiv.org

Abstract: This paper studies a one-sector optimal growth model with i.i.d. productivity shocks that are allowed to be unbounded. The utility function is assumed to be non-negative and unbounded from above. The novel feature in our framework is that the agent has risk sensitive preferences in the sense of Hansen and Sargent (1995). Under mild assumptions imposed on the productivity and utility functions we prove that the maximal discounted non-expected utility in the infinite time horizon satisfies the optimality equation and the agent possesses a stationary optimal policy. A new point used in our analysis is an inequality for the so-called associated random variables. We also establish the Euler equation that incorporates the solution to the optimality equation.

Date: 2015-09
New Economics Papers: this item is included in nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Journal of Economic Theory 173, 181-200, 2018

Downloads: (external link)
http://arxiv.org/pdf/1509.05638 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1509.05638

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().