Intertempordal optimality in a closed linear model of production (Q1115789)

The authors consider a simple closed linear production model which is described by a polyhedral technology set, a welfare function of isoelastic type and a discount factor. In this framework they present simplified proofs for (known) basic results on optimal programs. In particular, the existence of optimal infinite horizon programs is established and a price characterization of optimal programs is derived. It is shown that there exists a steady state program which is optimal. All these results are used to prove a turnpike theorem for optimal programs. Finally, the optimality of competitive programs is characterized via a period-by-period condition, which involves for any given period the prices and quantities of the given competitive program and of the steady-state program for that period.