Econometrica Vol. 56 No. 1 1988
The Inverse Optimal Problem: A Dynamic Programming Approach
Abstract
This paper solves the stochastic inverse optimal problem. Dynamic programming is used to transform the origina l problem into a differential equation. A solution exists for any pro duction function with a finite slope at the origin provided the savin gs function, starting from the origin, is steep initially and flat ev entually. Three consumption functions-linear, Keynes-ian, and Cantabr igian-are also studied with a Cobb-Douglas production technology. A w ell-known result in discrete time models-that a logarithmic utility f unction and a Cobb-Douglas production function imply a Keynesian cons umption function-does not carry through to the continuous time case.
- DOI
- 10.2307/1911845
- Volume
- 56
- Issue
- 1
- Pages
- 147
- Sources
- bibtex:phds-export.bib crossref openalex