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Optimal Consumption for Recursive Preferences with Local Substitution - the Case of Certainty

Author

Listed:
  • Li, Hanwu

    (Center for Mathematical Economics, Bielefeld University)

  • Riedel, Frank

    (Center for Mathematical Economics, Bielefeld University)

  • Yang, Shuzhen

    (Center for Mathematical Economics, Bielefeld University)

Abstract

We characterize optimal consumption policies in a recursive intertemporal utility framework with local substitution. We establish existence and uniqueness and a version of the Kuhn-Tucker theorem characterizing the optimal consumption plan. An explicit solution is provided for the case when the felicity function is of the Epstein-Zin’s type.

Suggested Citation

  • Li, Hanwu & Riedel, Frank & Yang, Shuzhen, 2022. "Optimal Consumption for Recursive Preferences with Local Substitution - the Case of Certainty," Center for Mathematical Economics Working Papers 670, Center for Mathematical Economics, Bielefeld University.
    • Handle: RePEc:bie:wpaper:670
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    File URL: https://pub.uni-bielefeld.de/download/2967056/2967057
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Recursive utility; Hindy-Huang-Kreps preference; Intertemporal Substitution; Utility maximization;
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