Differentiability of the value function and Euler equation in non-concave discrete time stochastic dynamic programming

Rincón-Zapatero, Juan Pablo

Differentiability of the value function and Euler equation in non-concave discrete time stochastic dynamic programming

Publisher: Springer

Issued date: 2019-03-25

Citation: Rincón Zapatero, J.P. (2019). Differentiability of the value function and Euler equation in non-concave discrete-time stochastic dynamic programming. Economic Theory Bulletin, 8, pp. 79-88.

ISSN: 2196-1085

DOI: https://doi.org/10.1007/s40505-019-00166-4

xmlui.dri2xhtml.METS-1.0.item-contributor-funder: Ministerio de Economía, Industria y Competitividad (España)
Comunidad de Madrid

Sponsor: Support from the Ministerio de Economía, Industria y Competitividad (Spain), Grants ECO2017-86261-P, ECO2014-56384-P and MDM 2014-0431, and from the Comunidad de Madrid, Grant MadEco-CM S2015/HUM-3444 is gratefully acknowledged.

Project: Gobierno de España. ECO2014-56384-P
Comunidad de Madrid. S2015/HUM-3444
Gobierno de España. ECO2017-86261-P

Keywords: Dynamic programming , Euler equation , Envelope theorem

JEL Classification: C60 , C61

URI: http://hdl.handle.net/10016/33936

Rights: © Springer

Abstract:

We consider a stochastic, non-concave dynamic programming problem admitting interior solutions and prove, under mild conditions, that the expected value function is differentiable along optimal paths. This property allows us to obtain rigorously the Euler equa [+]

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