On Variable Discounting in Dynamic Programming: Applications to Resource Extraction and Other Economic Models
This paper generalizes the classical discounted utility model introduced by Samuelson by replacing a constant discount rate with a function. The existence of recursive utilities and their constructions are based on Matkowski's extension of the Banach Contraction Principle. The derived utilities go beyond the class of recursive utilities studied in the literature and enable a discussion on subtle issues concerning time preferences in the theory of finance, economics or psychology. Moreover, our main results are applied to the theory of optimal growth with unbounded utility functions.
|Date of creation:||05 Jan 2011|
|Date of revision:||24 May 2011|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
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.:
- LE VAN, Cuong & MORHAIM, Lisa, 2001.
"Optimal growth models with bounded or unbounded returns: a unifying approach,"
CORE Discussion Papers
2001034, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Le Van, Cuong & Morhaim, Lisa, 2002. "Optimal Growth Models with Bounded or Unbounded Returns: A Unifying Approach," Journal of Economic Theory, Elsevier, vol. 105(1), pages 158-187, July.
- Le Van, C. & Morhaim, L., 2000. "Optimal Growth Models with Bounded or Unbounded Returns : a Unifying Approach," Papiers d'Economie MathÃ©matique et Applications 2000.64, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1).
- Alvarez, Fernando & Stokey, Nancy L., 1998. "Dynamic Programming with Homogeneous Functions," Journal of Economic Theory, Elsevier, vol. 82(1), pages 167-189, September.
- Uri Benzion & Amnon Rapoport & Joseph Yagil, 1989. "Discount Rates Inferred from Decisions: An Experimental Study," Management Science, INFORMS, vol. 35(3), pages 270-284, March.
- 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.
- Robert E. Lucas Jr. & Nancy L. Stokey, 1982.
"Optimal Growth with Many Consumers,"
518, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- LE VAN, Cuong & VAILAKIS, Yiannis, 2002.
"Recursive utility and optimal growth with bounded or unbounded returns,"
CORE Discussion Papers
2002055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Le Van, Cuong & Vailakis, Yiannis, 2005. "Recursive utility and optimal growth with bounded or unbounded returns," Journal of Economic Theory, Elsevier, vol. 123(2), pages 187-209, August.
- Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
- Bhattacharya,Rabi & Majumdar,Mukul, 2007. "Random Dynamical Systems," Cambridge Books, Cambridge University Press, number 9780521825658, 1.
- Boud, John III, 1990. "Recursive utility and the Ramsey problem," Journal of Economic Theory, Elsevier, vol. 50(2), pages 326-345, April.
- Juan Pablo RincÛn-Zapatero & Carlos RodrÌguez-Palmero, 2003. "Existence and Uniqueness of Solutions to the Bellman Equation in the Unbounded Case," Econometrica, Econometric Society, vol. 71(5), pages 1519-1555, 09.
- Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
- Marinacci, Massimo & Montrucchio, Luigi, 2010. "Unique solutions for stochastic recursive utilities," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1776-1804, September.
- Bhattacharya,Rabi & Majumdar,Mukul, 2007. "Random Dynamical Systems," Cambridge Books, Cambridge University Press, number 9780521532723, 1.
- Epstein, Larry G & Hynes, J Allan, 1983. "The Rate of Time Preference and Dynamic Economic Analysis," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 611-35, August.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:31069. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.