The existence of optimal consumption policies in optimal economic growth models with nonconvex technologies (Q1068682)

This paper proves the existence theorem for a class of one-sector growth models in which infinitely-lived agents maximize the discounted sum of instantaneous utilities of consumption, and the technology is nonconvex and thus may display increasing returns to scale. The main assumption on the technology set is that for any given stock of capital, k, the restricted technology set is nonempty, convex, and compact valued. An interesting feature of the proof is that it does not rely on any necessary conditions for the infinite-horizon optimization problem. The proof is obtained by establishing that (1) the set of admissible functions is relatively compact in the topology of uniform convergence on compact subsets of [0,\(\infty)\), and (2) the Lagrangian functional for the optimization problem is lower semi-continuous.