Non-Constant Discounting in Continuous Time

Larry Karp

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: This note derives the dynamic programming equation (DPE) to a differentiable Markov Perfect equilibrium in a problem with non-constant discounting and general functional forms. Beginning with a discrete stage model and taking the limit as the length of the stage goes to 0 leads to the DPE corresponding to the continuous time problem. The note discusses the multiplicity of equilibria under non-constant discounting, calculates the bounds of the set of candidate steady states, and Pareto ranks the equilibria.

Keywords: hyperbolic discounting; time consistency; Markov equilibria; non-uniqueness (search for similar items in EconPapers)
Date: 2005-01-11
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Related works:
Journal Article: Non-constant discounting in continuous time (2007)
Working Paper: Non-constant discounting in continuous time (2007)
Working Paper: Non-Constant Discounting in Continuous Time (2005)
Working Paper: Non-Constant Discounting in Continuous Time (2004)
Working Paper: Non-Constant Discounting in Continuous Time (2004)
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