On the existence of optimal processes in non-stationary environments |
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Authors: | Professor Tapan Mitra Yaw Nyarko |
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Affiliation: | (1) Present address: Department of Economics, College of Art and Sciences, Cornell University, Uris Hall, 14853 Ithaca, NY, USA;(2) Present address: Department of Economics, New York University, 10003 New York, NY, USA |
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Abstract: | We consider an aggregative model of intertemporal allocation under uncertainty, in which the utility and production functions are allowed to be time dependent, the random shocks occurring in each period are entirely arbitrary, and the production functions are permitted to be non-concave. In this framework, we provide a theorem on the existence of infinite-horizon optimal processes. In the course of establishing this result, we obtain the existence of optimal policy functions and we show that they are monotone in the stock levels.This paper has benefitted from the comments of two referees of the journal. Research of the first author was supported by a National Science Foundation Grant. |
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