A simple proof of the necessity of the transversality condition

This note provides a simple proof of the necessity of the transversality condition for the differentiable reduced-form model. The proof uses only an elementary perturbation argument without relying on dynamic programming. The proof makes it clear that, contrary to common belief, the necessity of the transversality condition can be shown in a straightforward way.

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Year of publication:	2002-02-26
Authors:	Kamihigashi, Takashi
Published in:	Economic Theory. - Springer. - Vol. 20.2002, 2, p. 427-433
Publisher:	Springer
Subject:	Transversality condition \| Reduced-form model \| Dynamic optimization

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Extent:	application/pdf
Type of publication:	Article
Notes:	Received: January 22, 2001; revised version: April 2, 2001
Classification:	C61 - Optimization Techniques; Programming Models; Dynamic Analysis ; D90 - Intertemporal Choice and Growth. General ; G12 - Asset Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005753404