Efficient Intertemporal Allocations with Recursive Utility / Bernard Dumas, Raman Uppal, Tan Wang.

Format:

Book

Author/Creator:

Dumas, Bernard.

Contributor:

National Bureau of Economic Research.

Uppal, Raman.

Wang, Tan.

Series:

Technical Working Paper Series (National Bureau of Economic Research) no. t0231.

NBER technical working paper series no. t0231

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1998.

Summary:

In this article, our objective is to determine efficient allocations in economies with multiple agents having recursive utility functions. Our main result is to show that in a multiagent economy, the problem of determining efficient allocations can be characterized in terms of a single value function (that of a social planner), rather than multiple functions (one for each investor), as has been proposed thus far (Duffie, Geoffard and Skiadas (1994)). We then show how the single value function can be identified using the familiar technique of stochastic dynamic programming. We achieve these goals by first extending to a stochastic environment Geoffard's (1996) concept of variational utility and his result that variational utility is equivalent to recursive utility, and then using these results to characterize allocations in a multiagent setting.

Notes:

Print version record

April 1998.