Efficient Intertemporal Allocations with Recursive Utility
In this article, our objective is to determine efficient allocations in economies with multiple agents having recursive utility functions. Our main result is to show that in a multiagent economy, the problem of determining efficient allocations can be characterized in terms of a single value function (that of a social planner), rather than multiple functions (one for each investor), as has been proposed thus far (Duffie, Geoffard and Skiadas (1994)). We then show how the single value function can be identified using the familiar technique of stochastic dynamic programming. We achieve these goals by first extending to a stochastic environment Geoffard's (1996) concept of variational utility and his result that variational utility is equivalent to recursive utility, and then using these results to characterize allocations in a multiagent setting.
|Date of creation:||Apr 1998|
|Date of revision:|
|Publication status:||published as Dumas, Bernard, Raman Uppal and Tan Wang. "Efficient Intertemporal Allocations With Recursive Utility," Journal of Economic Theory, 2000, v93(2,Aug), 240-259.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mas-Colell, Andreu, 1986. "The Price Equilibrium Existence Problem in Topological Vector Lattice s," Econometrica, Econometric Society, vol. 54(5), pages 1039-53, September.
- Svensson, Lars E. O., 1989.
"Portfolio choice with non-expected utility in continuous time,"
Elsevier, vol. 30(4), pages 313-317, October.
- Svensson, L.E.O., 1988. "Portfolio Choice With Non-Expected Utility In Continuous Time," Papers 423, Stockholm - International Economic Studies.
- Epstein, Larry G & Zin, Stanley E, 1989. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica, Econometric Society, vol. 57(4), pages 937-69, July.
- Duffie, Darrell & Geoffard, Pierre-Yves & Skiadas, Costis, 1994. "Efficient and equilibrium allocations with stochastic differential utility," Journal of Mathematical Economics, Elsevier, vol. 23(2), pages 133-146, March.
- Tjalling C. Koopmans, 1959. "Stationary Ordinal Utility and Impatience," Cowles Foundation Discussion Papers 81, Cowles Foundation for Research in Economics, Yale University.
- Dumas, Bernard, 1989. "Two-Person Dynamic Equilibrium in the Capital Market," Review of Financial Studies, Society for Financial Studies, vol. 2(2), pages 157-88.
- Dana Rose-anne & Le Van Cuong, 1987.
"Optimal growth and pareto-optimality,"
CEPREMAP Working Papers (Couverture Orange)
- Kreps, David M & Porteus, Evan L, 1978.
"Temporal Resolution of Uncertainty and Dynamic Choice Theory,"
Econometric Society, vol. 46(1), pages 185-200, January.
- David M Kreps & Evan L Porteus, 1978. "Temporal Resolution of Uncertainty and Dynamic Choice Theory," Levine's Working Paper Archive 625018000000000009, David K. Levine.
- Geoffard, Pierre-Yves, 1996. "Discounting and Optimizing: Capital Accumulation Problems as Variational Minmax Problems," Journal of Economic Theory, Elsevier, vol. 69(1), pages 53-70, April.
- Duffie, Darrell & Epstein, Larry G, 1992. "Stochastic Differential Utility," Econometrica, Econometric Society, vol. 60(2), pages 353-94, March.
- Epstein, Larry G, 1987. "The Global Stability of Efficient Intertemporal Allocations," Econometrica, Econometric Society, vol. 55(2), pages 329-55, March.
- Philippe Weil, 1990. "Nonexpected Utility in Macroeconomics," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 29-42.
- Kan Rui, 1995. "Structure of Pareto Optima When Agents Have Stochastic Recursive Preferences," Journal of Economic Theory, Elsevier, vol. 66(2), pages 626-631, August.
- N. El Karoui & S. Peng & M. C. Quenez, 1997. "Backward Stochastic Differential Equations in Finance," Mathematical Finance, Wiley Blackwell, vol. 7(1), pages 1-71.
- Duffie, Darrell & Epstein, Larry G, 1992. "Asset Pricing with Stochastic Differential Utility," Review of Financial Studies, Society for Financial Studies, vol. 5(3), pages 411-36.
- Constantinides, George M, 1982. "Intertemporal Asset Pricing with Heterogeneous Consumers and without Demand Aggregation," The Journal of Business, University of Chicago Press, vol. 55(2), pages 253-67, April.
- Lucas, Robert Jr. & Stokey, Nancy L., 1984.
"Optimal growth with many consumers,"
Journal of Economic Theory,
Elsevier, vol. 32(1), pages 139-171, February.
- Costis Skiadas, 1998. "Recursive utility and preferences for information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 12(2), pages 293-312.
- Duffie, Darrel & Lions, Pierre-Louis, 1992. "PDE solutions of stochastic differential utility," Journal of Mathematical Economics, Elsevier, vol. 21(6), pages 577-606.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberte:0231. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.