Optimality conditions and bubbles in sequential economies and bounded relative risk-aversion
The authors consider the infinite horizon economy in the framework adopted by \textit{T. Kamihigashi} [Econ. Theory 12, No.1, 103--122 (1998; Zbl 0909.90072)] and \textit{L.Montrucchio} and \textit{F. Privileggi} [J. Econ. Theory 101, 158--188 (2001; Zbl 1006.91034)]. The individual optimal decisions of an infinitely-lived agent in the light of short-run optimality conditions, known as stochastic Euler equation, as well as of long-run type, which are usually known as transversality conditions, are analyzed. The occurrence of pricing bubbles is investigated. New results generalizing the well-known and going deeply into the problem are obtained under suitable conditions. Several examples of bubbles to illustrate the results and underline the importance of adopted assumptions are given.
scientific article; zbMATH DE number 1960711