Do not Blame Bellman: It Is Koopmans' Fault.
We provide a unified approach to stochastic dynamic programming with recursive utility based on an elementary application of Tarski's fixed point theorem. We establish that the exclusive source of multiple values is the presence of multiple recursive utilities consistent with the given aggregator, e...
| Published in: | Econometrica Vol. 92; no. 1; pp. 111 - 141 |
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| Main Authors: | , , |
| Format: | Article |
| Published: |
Wiley-Blackwell
Jan2024
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| Subjects: | |
| Online Access: | View this record in EBSCOhost |
| Summary: | We provide a unified approach to stochastic dynamic programming with recursive utility based on an elementary application of Tarski's fixed point theorem. We establish that the exclusive source of multiple values is the presence of multiple recursive utilities consistent with the given aggregator, each yielding a legitimate value of the recursive program. We also present sufficient conditions ensuring a unique value of the recursive program in some circumstances. Overall, acknowledging the unavoidable failure of uniqueness in general, we argue that the greatest fixed point of the Bellman operator should have a privileged position. |
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