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On Discounted Dynamic Programming with Unbounded Returns

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  • Matkowski, Janusz
  • Nowak, Andrzej S.

Abstract

In this paper, we apply the idea of $k$-local contraction of \cite{zec, zet} to study discounted stochastic dynamic programming models with unbounded returns. Our main results concern the existence of a unique solution to the Bellman equation and are applied to the theory of stochastic optimal growth. Also a discussion of some subtle issues concerning k-local and global contractions is included.

Suggested Citation

  • Matkowski, Janusz & Nowak, Andrzej S., 2008. "On Discounted Dynamic Programming with Unbounded Returns," MPRA Paper 12215, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:12215
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    References listed on IDEAS

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    1. Le Van, Cuong & Vailakis, Yiannis, 2005. "Recursive utility and optimal growth with bounded or unbounded returns," Journal of Economic Theory, Elsevier, vol. 123(2), pages 187-209, August.
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    More about this item

    Keywords

    Stochastic dynamic programming; Bellman functional equation; contraction mapping; stochastic optimal growth;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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