On Variable Discounting in Dynamic Programming: Applications to Resource Extraction and Other Economic Models
AbstractThis paper generalizes the classical discounted utility model introduced by Samuelson by replacing a constant discount rate with a function. The existence of recursive utilities and their constructions are based on Matkowski's extension of the Banach Contraction Principle. The derived utilities go beyond the class of recursive utilities studied in the literature and enable a discussion on subtle issues concerning time preferences in the theory of finance, economics or psychology. Moreover, our main results are applied to the theory of optimal growth with unbounded utility functions.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 31069.
Date of creation: 05 Jan 2011
Date of revision: 24 May 2011
Dynamic programming Variable discounting Bellman equation;
Find related papers by JEL classification:
- D90 - Microeconomics - - Intertemporal Choice - - - General
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-30 (All new papers)
- NEP-DGE-2011-05-30 (Dynamic General Equilibrium)
- NEP-EVO-2011-05-30 (Evolutionary Economics)
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