Necessity of Transversality Conditions for Stochastic Problems

Takashi Kamihigashi

No 115, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: This paper establishes (i) an extension of Michel's (1990, Theorem 1) necessity result to an abstract reduced-form model, (ii) a generalization of the results of Weitzman (1973) and Ekeland and Scheinkman (1986), and (iii) a new result that is useful particularly in the case of homogeneous returns. These results are shown for an extremely general discrete-time reduced-form model that does not assume differentiability, continuity, or concavity, and that imposes virtually no restriction on the state spaces. The three results are futher extended to a stochastic reduced-form model. The stochastic extensions are easily accomplished since our deterministic model is so general that the stochastic model is in fact a special case of the deterministic model. We apply our stochastic results to a stochastic reduced-form model with homogeneous returns and a general type of stochastic growth model with CRRA utility.

Keywords: Transversality condition; Stochastic optimization; Stochastic reduced-form model; Homogeneous returns; Stochastic growth model (search for similar items in EconPapers)
JEL-codes: C61 D90 G12 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2000-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp115.pdf First version, 2000 (application/pdf)

Related works:
Journal Article: Necessity of transversality conditions for stochastic problems (2003)
Working Paper: Necessity of Transversality Conditions for Stochastic Problems (2002)
Working Paper: Necessity of Transversality Conditions for Stochastic Problems (2001)
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:kob:dpaper:115

Access Statistics for this paper

More papers in Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University 2-1 Rokkodai, Nada, Kobe 657-8501 JAPAN. Contact information at EDIRC.
Bibliographic data for series maintained by Office of Promoting Research Collaboration, Research Institute for Economics & Business Administration, Kobe University ().