Super Contact and Related Optimality Conditions: A Supplement to AvinashDixits / Bernard Dumas.

Format:

Book

Author/Creator:

Dumas, Bernard.

Contributor:

National Bureau of Economic Research.

Series:

Technical Working Paper Series (National Bureau of Economic Research) no. t0077.

NBER technical working paper series no. t0077

Language:

English

Subjects (All):

Brownian motion processes.

Mathematical optimization.

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Super Contact and Related Optimality Conditions

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1989.

Cambridge, Mass. : National Bureau of Economic Research, 1989.

Summary:

Dixit (1988) observed that the mathematical construct of "regulated Brownian motion" developed by Harrison (1985) had proved useful in economic models of decision-making under uncertainty. In a recent note he provided a number of methods for calculating expected discounted payoff functions based on such processes. The purpose of this supplement is twofold: -determine to what extent the first-degree conditions reached by Dixit (his equations (12) and (13) or (12') and (13')) are simply a consequence of the definition of the expected discounted payoff, or to what extent they can be interpreted as first order conditions of some optimization problem, as has been suggested in Dumas(1988); -extend Dixit's treatment to the case where there are fixed costs of regulation as 1n Grossman-Laroque (1987).

Notes:

Print version record

April 1989.