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The Fundamentals of Intertemporal Optimization in the Continuous Time Modelling of Consumer Behaviour

The Fundamentals of Intertemporal Optimization in the Continuous Time Modelling of Consumer... Abstract This note explains the fundamentals of intertemporal optimization for consumer behaviour modelled in continuous time when preferences are recursive as in Uzawa and Epstein. After the differential in utility and the differential in the value of assets have been defined and computed, the optimization principle is summarized and fully set out in one equation equating the former with the utility value of the latter. This equation is then shown to be equivalent to Pontryagin’s maximum principle, and a close analogy is drawn between static and dynamic consumer theory. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Japanese Economic Review Springer Journals

The Fundamentals of Intertemporal Optimization in the Continuous Time Modelling of Consumer Behaviour

Hayakawa, Hiroaki; Ishizawa, Suezo
The Japanese Economic Review , Volume 48 (1): 12 – Mar 1, 1997
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References (11)

Publisher
Springer Journals
Copyright
1997 Japanese Economic Association
ISSN
1352-4739
eISSN
1468-5876
DOI
10.1111/1468-5876.00039
Publisher site
See Article on Publisher Site

Abstract

Abstract This note explains the fundamentals of intertemporal optimization for consumer behaviour modelled in continuous time when preferences are recursive as in Uzawa and Epstein. After the differential in utility and the differential in the value of assets have been defined and computed, the optimization principle is summarized and fully set out in one equation equating the former with the utility value of the latter. This equation is then shown to be equivalent to Pontryagin’s maximum principle, and a close analogy is drawn between static and dynamic consumer theory.

Journal

The Japanese Economic Review – Springer Journals

Published: Mar 1, 1997

Keywords: economics, general; microeconomics; macroeconomics/monetary economics//financial economics; econometrics; development economics; economic history

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