A generalized endogenous grid method for non-concave problems

This paper extends Carroll's (2006) endogenous grid method and its combination with value function iteration by Barillas and Fernandez-Villaverde (2007) to non-concave problems. The method is illustrated using a non-concave consumer problem in which consumers choose both durable and non-durable consumption. The durable choice is discrete and subject to non-convex adjustment costs. The method yields substantial gains in accuracy and efficiency relative to value function iteration, the standard solution choice for non-concave problems.