IDEAS home Printed from https://ideas.repec.org/p/zbw/sfb373/1998108.html
   My bibliography  Save this paper

Non-time additive utility optimization: The case of certainty

Author

Listed:
  • Riedel, Frank
  • Bank, Peter

Abstract

We study the intertemporal utility maximization problem for Hindy-Huang-Kreps utilities. Necessary and sufficient conditions for optimality are given. An explicit solution is provided for a large class of utility functions. In particular, the case of separable power utilities with a finite time horizon is solved explicitly.

Suggested Citation

  • Riedel, Frank & Bank, Peter, 1998. "Non-time additive utility optimization: The case of certainty," SFB 373 Discussion Papers 1998,108, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    • Handle: RePEc:zbw:sfb373:1998108
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/61261/1/72205761X.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Sundaresan, Suresh M, 1989. "Intertemporally Dependent Preferences and the Volatility of Consumption and Wealth," The Review of Financial Studies, Society for Financial Studies, vol. 2(1), pages 73-89.
    2. Hindy, Ayman & Huang, Chi-fu & Kreps, David, 1992. "On intertemporal preferences in continuous time : The case of certainty," Journal of Mathematical Economics, Elsevier, vol. 21(5), pages 401-440.
    3. Constantinides, George M, 1990. "Habit Formation: A Resolution of the Equity Premium Puzzle," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 519-543, June.
    4. Hindy, Ayman & Huang, Chi-fu, 1992. "Intertemporal Preferences for Uncertain Consumption: A Continuous Time Approach," Econometrica, Econometric Society, vol. 60(4), pages 781-801, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bank, Peter & Riedel, Frank, 1999. "Optimal consumption choice under uncertainty with intertemporal substitution," SFB 373 Discussion Papers 1999,71, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    2. Gilboa, Itzhak & Postlewaite, Andrew & Samuelson, Larry, 2016. "Memorable consumption," Journal of Economic Theory, Elsevier, vol. 165(C), pages 414-455.
    3. Bank, Peter & Riedel, Frank, 2003. "Optimal Dynamic Choice of Durable and Perishable Goods," Bonn Econ Discussion Papers 29/2003, University of Bonn, Bonn Graduate School of Economics (BGSE).
    4. Li, Hanwu & Riedel, Frank & Yang, Shuzhen, 2024. "Optimal consumption for recursive preferences with local substitution — the case of certainty," Journal of Mathematical Economics, Elsevier, vol. 110(C).
    5. Jeon, Junkee & Koo, Hyeng Keun & Park, Kyunghyun, 2021. "Finite horizon portfolio selection with durable goods," Mathematical Social Sciences, Elsevier, vol. 111(C), pages 55-67.
    6. Manel Baucells & Lin Zhao, 2020. "Everything in Moderation: Foundations and Applications of the Satiation Model," Management Science, INFORMS, vol. 66(12), pages 5701-5719, December.
    7. Gundel, Anne & Weber, Stefan, 2008. "Utility maximization under a shortfall risk constraint," Journal of Mathematical Economics, Elsevier, vol. 44(11), pages 1126-1151, December.
    8. Riedel, Frank, 2001. "Optimal consumption choice for ratchet investors," SFB 373 Discussion Papers 2001,92, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    9. repec:dau:papers:123456789/2317 is not listed on IDEAS
    10. Manel Baucells & Lin Zhao, 2019. "It Is Time to Get Some Rest," Management Science, INFORMS, vol. 65(4), pages 1717-1734, April.
    11. Carlier Guillaume & Dana Rose-Anne, 2006. "Law invariant concave utility functions and optimization problems with monotonicity and comonotonicity constraints," Statistics & Risk Modeling, De Gruyter, vol. 24(1/2006), pages 1-26, July.
    12. Ferrari, Giorgio & Li, Hanwu & Riedel, Frank, 2020. "Optimal Consumption with Intertemporal Substitution under Knightian Uncertainty," Center for Mathematical Economics Working Papers 641, Center for Mathematical Economics, Bielefeld University.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bank, Peter & Riedel, Frank, 1999. "Optimal consumption choice under uncertainty with intertemporal substitution," SFB 373 Discussion Papers 1999,71, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    2. Hindy, Ayman & Huang, Chi-fu & Zhu, Steven H., 1997. "Optimal consumption and portfolio rules with durability and habit formation," Journal of Economic Dynamics and Control, Elsevier, vol. 21(2-3), pages 525-550.
    3. Manel Baucells & Rakesh K. Sarin, 2007. "Satiation in Discounted Utility," Operations Research, INFORMS, vol. 55(1), pages 170-181, February.
    4. Riedel, Frank, 2005. "Generic determinacy of equilibria with local substitution," Journal of Mathematical Economics, Elsevier, vol. 41(4-5), pages 603-616, August.
    5. Suresh M. Sundaresan, 2000. "Continuous‐Time Methods in Finance: A Review and an Assessment," Journal of Finance, American Finance Association, vol. 55(4), pages 1569-1622, August.
    6. Xianzhe Chen & Weidong Tian, 2014. "Optimal portfolio choice and consistent performance," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 37(2), pages 453-474, October.
    7. Olivier Allais, 2004. "Local Substitution and Habit Persistence: Matching the Moments of the Equity Premium and the Risk-Free Rate," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(2), pages 265-296, April.
    8. Manel Baucells & Lin Zhao, 2020. "Everything in Moderation: Foundations and Applications of the Satiation Model," Management Science, INFORMS, vol. 66(12), pages 5701-5719, December.
    9. Yeung Lewis Chan & Leonid Kogan, 2002. "Catching Up with the Joneses: Heterogeneous Preferences and the Dynamics of Asset Prices," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1255-1285, December.
    10. Choi, Kyoung Jin & Jeon, Junkee & Koo, Hyeng Keun, 2022. "Intertemporal preference with loss aversion: Consumption and risk-attitude," Journal of Economic Theory, Elsevier, vol. 200(C).
    11. Hansen, Lars Peter, 2013. "Uncertainty Outside and Inside Economic Models," Nobel Prize in Economics documents 2013-7, Nobel Prize Committee.
    12. Aadland, David & Huang, Kevin X. D., 2004. "Consistent high-frequency calibration," Journal of Economic Dynamics and Control, Elsevier, vol. 28(11), pages 2277-2295, October.
    13. Venegas-Martínez, Francisco & Mendoza-Rivera, Ricardo J. & García-Pérez, Luis E., 2021. "Optimal decisions on the instantaneous rate of growth of consumption in excess of habit and money demand," Panorama Económico, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 17(34), pages 39-47, Segundo s.
    14. Kris Jacobs, 2001. "Estimating Nonseparable Preference Specifications for Asset Market Participants," CIRANO Working Papers 2001s-12, CIRANO.
    15. Gilboa, Itzhak & Postlewaite, Andrew & Samuelson, Larry, 2016. "Memorable consumption," Journal of Economic Theory, Elsevier, vol. 165(C), pages 414-455.
    16. Robert Östling & Erik Lindqvist & David Cesarini & Joseph Briggs, 2016. "Wealth, Portfolio Allocations, and Risk Preference," 2016 Meeting Papers 1089, Society for Economic Dynamics.
    17. Christos I. Giannikos & Georgios Koimisis, 2021. "Equity Premium with Habits, Wealth Inequality and Background Risk," JRFM, MDPI, vol. 14(7), pages 1-15, July.
    18. Jonathan E. Ingersoll Jr. & Lawrence J. Jin, 2014. "Realization Utility with Reference-Dependent Preferences," Papers 1408.2859, arXiv.org.
    19. Li, Hanwu & Riedel, Frank & Yang, Shuzhen, 2024. "Optimal consumption for recursive preferences with local substitution — the case of certainty," Journal of Mathematical Economics, Elsevier, vol. 110(C).
    20. Tobias Adrian & Richard K. Crump & Erik Vogt, 2019. "Nonlinearity and Flight‐to‐Safety in the Risk‐Return Trade‐Off for Stocks and Bonds," Journal of Finance, American Finance Association, vol. 74(4), pages 1931-1973, August.

    More about this item

    Keywords

    non-time additive utility optimization; intertemporal utility;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:sfb373:1998108. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/sfhubde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.