Non-constant Discounting in Continuous Time


Karp, L.S. (2007) Non-constant Discounting in Continuous Time Journal of Economic Theory, 132, (1), pp. 557-568. (doi:10.1016/j.jet.2005.07.006).

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Description/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.

Item Type: Article
Digital Object Identifier (DOI): doi:10.1016/j.jet.2005.07.006
ISSNs: 0022-0531 (print)
Keywords: hyperbolic discounting, time consistency, markov equilibria, non-uniqueness, observational equivalence, pareto efficiency
Subjects:

ePrint ID: 39702
Date :
Date Event
2007Published
Date Deposited: 29 Jun 2006
Last Modified: 16 Apr 2017 21:54
Further Information:Google Scholar
URI: http://eprints.soton.ac.uk/id/eprint/39702

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