We explore intertemporal preferences that are recursive and account for local intertemporal substitution. First, we establish a rigorous foundation for these preferences and analyze their properties. Next, we examine the associated optimal consumption problem, proving the existence and...

We develop a new dynamic continuous-time model of optimal consumption and investment to include independent stochastic labor income. We reduce the problem of solving the Bellman equation to a problem of solving an integral equation. We then explicitly characterize the optimal consumption and...

The Berry, Levinsohn, and Pakes (1995, BLP) model is widely used to obtain parameter estimates of market forces in differentiated product markets. The results are often used as an input to evaluate economic activity in a structural model of demand and supply. Precise estimation of parameter...

The rationality of choices is one of the most fundamental assumptions of traditional economic analysis. Yet, substantial evidence has documented that choices often cannot be rationalized by utility maximization. Several measures of rationality have been introduced in the literature to quantify...

The optimal investment-consumption analysis under insurer default risk and inflation risk for retirees who receive defined benefit pension payments is conducted. To enhance applicability, the minimum welfare guarantee and bequest motives are considered. Using the dynamic programming principle...

Manufacturing activities are associated with environmental issues, including industrial waste and dust. Recent comprehensive policies in China have effectively reduced the emissions of some atmospheric pollutants, such as SO2, NOx, CO, PM10, and VOC.However, this does not apply to industrial...

This paper explores optimal consumption and portfolio decisions in the presence of risky house prices. We assume that changes in real interest rates and future rents directly impact house prices. A novel aspect of our model is that rent inflation rates and consumption inflation rates are...