Efficient Intertemporal Allocations with Recursive Utility

Bernard Dumas (), Raman Uppal and Tan Wang

No 231, NBER Technical Working Papers from National Bureau of Economic Research, Inc

Abstract: In this article, our objective is to determine efficient allocations in economies with multiple agents having recursive utility functions. Our main result is to show that in a multiagent economy, the problem of determining efficient allocations can be characterized in terms of a single value function (that of a social planner), rather than multiple functions (one for each investor), as has been proposed thus far (Duffie, Geoffard and Skiadas (1994)). We then show how the single value function can be identified using the familiar technique of stochastic dynamic programming. We achieve these goals by first extending to a stochastic environment Geoffard's (1996) concept of variational utility and his result that variational utility is equivalent to recursive utility, and then using these results to characterize allocations in a multiagent setting.

JEL-codes: D61 D81 (search for similar items in EconPapers)
Date: 1998-04
New Economics Papers: this item is included in nep-mic
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Published as Dumas, Bernard, Raman Uppal and Tan Wang. "Efficient Intertemporal Allocations With Recursive Utility," Journal of Economic Theory, 2000, v93(2,Aug), 240-259.

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Related works:
Journal Article: Efficient Intertemporal Allocations with Recursive Utility (2000)
Working Paper: Efficient Intertemporal Allocations with Recursive Utility (1997)
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