Solving the non-convexity problem in some shopping-time and human-capital models

Rubens Cysne

No 567, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: Several works in the shopping-time and in the human-capital literature, due to the nonconcavity of the underlying Hamiltonian, use Örst-order conditions in dynamic optimization to characterize necessity, but not su¢ ciency, in intertemporal problems. In this work I choose one paper in each one of these two areas and show that optimality can be characterized by means of a simple aplication of Arrowís (1968) su¢ ciency theorem.

Date: 2004-09-01
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