Non-constant discounting in continuous time |
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Authors: | Larry Karp |
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Affiliation: | Department of Agricultural and Resource Economics, 207 Giannini Hall, University of California, Berkeley CA 94720, USA |
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Abstract: | This paper derives the dynamic programming equation (DPE) to a differentiable Markov Perfect equilibrium in a problem with non-constant discounting and general functional forms. Beginning with a discrete stage model and taking the limit as the length of the stage goes to 0 leads to the DPE corresponding to the continuous time problem. The note discusses the multiplicity of equilibria under non-constant discounting, calculates the bounds of the set of candidate steady states, and Pareto ranks the equilibria. |
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Keywords: | D83 L50 |
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