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
Publisher:	Berlin : Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes
Subject:	Intertemporal Consumption Choice \| Habit Formation \| Non-Time Separable Utility

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Series:	SFB 373 Discussion Paper ; 2001,92
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	725955678 [GVK] hdl:10419/62715 [Handle] RePEc:zbw:sfb373:200192 [RePEc]
Classification:	D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
Source:	EconStor

Persistent link: https://www.econbiz.de/10010310367