Optimal consumption choice for ratchet investors

The utility maximization problem of ratchet investors who do not tolerate any decline in their consumption rate is solved explicitly for all felicity functions in a Markovian framework which includes Brownian motion and Poisson processes as special cases. The optimal consumption plan turns out to be the running maximum of the optimal plan a conventional time-additive investor would choose.

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Year of publication:	2001
Authors:	Riedel, Frank
Institutions:	Sonderforschungsbereich 373, Quantifikation und Simulation ökonomischer Prozesse, Wirtschaftswissenschaftliche Fakultät
Subject:	Intertemporal Consumption Choice \| Habit Formation \| Non-Time Separable Utility

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Extent:	application/pdf
Series:	SFB 373 Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	Number 2001,92
Classification:	D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010956474