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Optimal consumption analysis for a stochastic growth model with technological shocks

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  • Weipeng Yuan
  • Shaoyong Lai
  • Hanlei Hu

Abstract

An optimal consumption problem of maximizing the expected discounted value of utility is discussed for an economic growth model with the random technological shocks. Applying the technique of dynamic programming principle, we derive the Hamilton‐Jacobi‐Bellman equation corresponding to the optimization problem and prove that the value function is a unique viscosity solution to the equation. Moreover, the optimal consumption policy is given in a feedback form under weak assumptions.

Suggested Citation

  • Weipeng Yuan & Shaoyong Lai & Hanlei Hu, 2018. "Optimal consumption analysis for a stochastic growth model with technological shocks," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 34(5), pages 746-755, September.
    • Handle: RePEc:wly:apsmbi:v:34:y:2018:i:5:p:746-755
    DOI: 10.1002/asmb.2384
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    Cited by:

    1. Motoh Tsujimura & Hidekazu Yoshioka, 2023. "A robust consumption model when the intensity of technological progress is ambiguous," Mathematics and Financial Economics, Springer, volume 17, number 2, June.

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