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A simple proof of the necessity of the transversality condition

Author

Listed:
  • Takashi Kamihigashi

    (RIEB, Kobe University, Rokkodai, Nada, Kobe 657-8501, 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.

Suggested Citation

  • Takashi Kamihigashi, 2002. "A simple proof of the necessity of the transversality condition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 20(2), pages 427-433.
    • Handle: RePEc:spr:joecth:v:20:y:2002:i:2:p:427-433
    Note: Received: January 22, 2001; revised version: April 2, 2001
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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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