Dynamic programming with state-dependent discounting

DOI10.1016/J.JET.2021.105190zbMATH Open1458.91096arXiv1908.08800OpenAlexW3123359883MaRDI QIDQ1995327FDOQ1995327

Authors: John Stachurski, Jun-Nan Zhang 

Publication date: 23 February 2021

Published in: Journal of Economic Theory (Search for Journal in Brave)

Abstract: This paper extends the core results of discrete time infinite horizon dynamic programming to the case of state-dependent discounting. We obtain a condition on the discount factor process under which all of the standard optimality results can be recovered. We also show that the condition cannot be significantly weakened. Our framework is general enough to handle complications such as recursive preferences and unbounded rewards. Economic and financial applications are discussed.

Full work available at URL: https://arxiv.org/abs/1908.08800

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zbMATH Keywords

dynamic programmingoptimalitystate-dependent discounting

Mathematics Subject Classification ID

Dynamic programming (90C39) Microeconomic theory (price theory and economic markets) (91B24)

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Cited In (8)

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• Discounted Dynamic Programming
• The dynamic programming method in systems with states in the form of distributions
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