A simple proof of the necessity of the transversality condition
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.
Volume (Year): 20 (2002)
Issue (Month): 2 ()
|Note:||Received: January 22, 2001; revised version: April 2, 2001|
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References listed on IDEAS
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- Bezalel Peleg & Harl E. Ryder, 1972. "On Optimal Consumption Plans in a Multi-sector Economy," Review of Economic Studies, Oxford University Press, vol. 39(2), pages 159-169.
- Takashi Kamihigashi, 2002.
"Necessity of Transversality Conditions for Stochastic Problems,"
Discussion Paper Series
128, Research Institute for Economics & Business Administration, Kobe University.
- Kamihigashi, Takashi, 2003. "Necessity of transversality conditions for stochastic problems," Journal of Economic Theory, Elsevier, vol. 109(1), pages 140-149, March.
- Takashi Kamihigashi, 2000. "Necessity of Transversality Conditions for Stochastic Problems," Discussion Paper Series 115, Research Institute for Economics & Business Administration, Kobe University.
- Takashi Kamihigashi, 2001. "Necessity of Transversality Conditions for Stochastic Problems," Department of Economics Working Papers 01-02, Stony Brook University, Department of Economics.
- Kamihigashi, Takashi, 2001. "Necessity of Transversality Conditions for Infinite Horizon Problems," Econometrica, Econometric Society, vol. 69(4), pages 995-1012, July.
- Takashi Kamihigashi, 2000. "A simple proof of Ekeland and Scheinkman's result on the necessity of a transversality condition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(2), pages 463-468.
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