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...

This paper establishes (i) an extension of Michel's (1990, Theorem 1) necessity result to an abstract reduced-form model, (ii) a generalization of the results of Weitzman (1973) and Ekeland and Scheinkman (1986), and (iii) a new result that is useful particularly in the case of homogeneous...

This paper studies necessity of transversality conditions for the continuous time, reduced form model. By generalizing Benveniste and Scheinkman's (1982) quot;envelopequot; condition and Michel's (1990) version of the squeezing argument, we show a generalization of Michel's (1990, Theorem 1)...

This paper studies conditions under which the price of an asset is uniquely determined by its fundamental value (i.e., no bubbles can arise) in Lucas-type asset pricing models with unbounded utility. After discussing Gilles and LeRoy's (1992) example, we construct an example of a two-period,...

This paper studies necessity of transversality conditions for the continuous time, reduced form model. By generalizing Benveniste and Scheinkman's (1982) quot;envelopequot; condition and Michel's (1990) version of the squeezing argument, we show a generalization of Michel's (1990, Theorem 1)...

This paper studies conditions under which the price of an asset is uniquely determined by its fundamental value (i.e., no bubbles can arise) in Lucas-type asset pricing models with unbounded utility. After discussing Gilles and LeRoy's (1992) example, we construct an example of a two-period,...

The stochastic dominance ordering over probability distributions is one of the most familiar concepts in economic and financial analysis. One difficulty with stochastic dominance is that many distributions are not ranked at all, even when arbitrarily close to other distributions that are....

We establish some elementary results on solutions to the Bellman equation without introducing any topological assumption. Under a small number of conditions, we show that the Bellman equation has a unique solution in a certain set, that this solution is the value function, and that the value...

The stochastic dominance ordering over probability distributions is one of the most familiar concepts in economic and financial analysis. One difficulty with stochastic dominance is that many distributions are not ranked at all, even when arbitrarily close to other distributions that are....

We show that the critical capital stock of the Dechert and Nishimura (1983) model is a decreasing and continuous function of the discount factor. We also show that the critical capital stock merges with a nonzero steady state as the discount factor decreases to a certain boundary value, and that...