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Annals of Operations Research

, Volume 220, Issue 1, pp 263–278 | Cite as

On variable discounting in dynamic programming: applications to resource extraction and other economic models

  • Anna Jaśkiewicz
  • Janusz Matkowski
  • Andrzej S. NowakEmail author
Article

Abstract

This paper generalizes the classical discounted utility model introduced in Samuelson (Rev. Econ. Stud. 4:155–161, 1937) by replacing a constant discount rate with a function. The existence of recursive utilities and their constructions are based on Matkowski’s extension of the Banach Contraction Principle. The derived utilities go beyond the class of recursive utilities studied in the literature and enable a discussion on subtle issues concerning time preferences in the theory of finance, economics or psychology. Moreover, our main results are applied to the theory of optimal economic growth related with resource extraction models with unbounded utility function of consumption.

Keywords

Dynamic programming Variable discounting Bellman equation Resource extraction Growth theory 

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Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  • Anna Jaśkiewicz
    • 1
  • Janusz Matkowski
    • 2
    • 3
  • Andrzej S. Nowak
    • 2
    • 4
    Email author
  1. 1.Institute of Mathematics and Computer ScienceWrocław University of TechnologyWrocławPoland
  2. 2.Faculty of Mathematics, Computer Science and EconometricsUniversity of Zielona GóraZielona GóraPoland
  3. 3.Institute of MathematicsSilesian UniversityKatowicePoland
  4. 4.Institute of FinancePWSZ NysaPoland

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