Optimal Consumption for Recursive Preferences with Local Substitution -- the Case of Certainty

2022/11/14 by Li, Hanwu, Riedel, Frank, Yang, Shuzhen
#60H30 #65C30 #91B42 #93E20 #FOS: Mathematics #Optimization and Control (math.OC)

paper · doi:10.48550/arxiv.2211.07801

Abstract

We characterize optimal consumption policies in a recursive intertemporal utility framework with local substitution. We establish existence and uniqueness and a version of the Kuhn-Tucker theorem characterizing the optimal consumption plan. An explicit solution is provided for the case when the felicity function is of the Epstein-Zin's type.

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