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Optimal consumption/investment and retirement with necessities and luxuries

Author

Listed:
  • Hyeng Keun Koo

    (Ajou University)

  • Kum-Hwan Roh

    (Hannam University)

  • Yong Hyun Shin

    (Sookmyung Women’s University)

Abstract

In this paper, we study an optimal consumption of necessary and luxury goods, investment, and voluntary retirement choice model. The felicity function is given by the weighted sum of quadratic and HARA utility functions. We use the duality/martingale method to derive a closed form solution for optimal consumption of necessity and luxury, and investment. We also explain properties of optimal policies by using numerical results.

Suggested Citation

  • Hyeng Keun Koo & Kum-Hwan Roh & Yong Hyun Shin, 2021. "Optimal consumption/investment and retirement with necessities and luxuries," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 94(2), pages 281-317, October.
    • Handle: RePEc:spr:mathme:v:94:y:2021:i:2:d:10.1007_s00186-021-00758-6
    DOI: 10.1007/s00186-021-00758-6
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    References listed on IDEAS

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