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A Simple Proof of the Necessity of the Transversality Condition

  • Takashi Kamihigashi

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

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.

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Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number 116.

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Length: 7 pages
Date of creation: Jan 2001
Date of revision:
Handle: RePEc:kob:dpaper:116
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  1. Takashi Kamihigashi, 2000. "Necessity of Transversality Conditions for Stochastic Problems," Discussion Paper Series 115, Research Institute for Economics & Business Administration, Kobe University.
  2. Takashi Kamihigashi, 2000. "A simple proof of Ekeland and Scheinkman's result on the necessity of a transversality condition," Economic Theory, Springer, vol. 15(2), pages 463-468.
  3. Kamihigashi, Takashi, 2001. "Necessity of Transversality Conditions for Infinite Horizon Problems," Econometrica, Econometric Society, vol. 69(4), pages 995-1012, July.
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