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A Simple Proof of the Necessity of the Transversality Condition

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  • Takashi Kamihigashi

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

Abstract

This note provides a simple proof of the necessity of the transversality condition for the differentiable reduced-form model. The proof uses only an elementary perturbation argument without relying on dynamic programming. The proof makes it clear that, contrary to common belief, the necessity of the transversality condition can be shown in a straightforward way.

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File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp116.pdf
File Function: First version, 2001
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Bibliographic Info

Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number 116.

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Length: 7 pages
Date of creation: Jan 2001
Date of revision:
Handle: RePEc:kob:dpaper:116

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Keywords: Programming; Dynamic Optimization; Models;

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References

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  1. Takashi Kamihigashi, 2001. "Necessity of Transversality Conditions for Stochastic Problems," Department of Economics Working Papers 01-02, Stony Brook University, Department of Economics.
  2. Takashi Kamihigashi, 2000. "A simple proof of Ekeland and Scheinkman's result on the necessity of a transversality condition," Economic Theory, Springer, vol. 15(2), pages 463-468.
  3. Kamihigashi, Takashi, 2001. "Necessity of Transversality Conditions for Infinite Horizon Problems," Econometrica, Econometric Society, vol. 69(4), pages 995-1012, July.
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Citations

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Cited by:
  1. Takashi Kamihigashi, 2000. "Necessity of Transversality Conditions for Stochastic Problems," Discussion Paper Series 115, Research Institute for Economics & Business Administration, Kobe University.
  2. Buiter, Willem H, 2004. "Helicopter Money: Irredeemable Fiat Money and the Liquidity Trap," CEPR Discussion Papers 4202, C.E.P.R. Discussion Papers.
  3. Takashi Kamihigashi, 2006. "Transversality Conditions and Dynamic Economic Behavior," Discussion Paper Series 180, Research Institute for Economics & Business Administration, Kobe University.
  4. Dapeng Cai & Takashi Gyoshin Nitta, 2012. "Transversality Conditions for Stochastic Higher-Order Optimality: Continuous and Discrete Time Problems," Papers 1203.3869, arXiv.org.
  5. Stefano Bosi & Cuong Le Van & Ngoc-Sang Pham, 2014. "Intertemporal equilibrium with production: bubbles and efficiency," Working Papers 2014-306, Department of Research, Ipag Business School.
  6. Stefano Bosi & Cuong Le Van & Ngoc-Sang Pham, 2014. "Intertemporal equilibrium with production: bubbles and efficiency," Documents de travail du Centre d'Economie de la Sorbonne 14043, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  7. Takashi Kamihigashi, 2004. "Necessity of the Transversality Condition for Stochastic Models with Bounded or CRRA Utility," Discussion Paper Series 152, Research Institute for Economics & Business Administration, Kobe University.
  8. Stefano Bosi & Cuong Le Van & Ngoc-Sang Pham, 2014. "Intertemporal equilibrium with production: bubbles and efficiency," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01020888, HAL.
  9. Ryoji Hiraguchi, 2004. "Some Foundations for Multiplicative Habits Models," Economics Working Paper Archive 516, The Johns Hopkins University,Department of Economics.
  10. Hiraguchi, Ryoji, 2011. "A two sector endogenous growth model with habit formation," Journal of Economic Dynamics and Control, Elsevier, vol. 35(4), pages 430-441, April.

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