Stochastic Optimal Growth Model with S-Shaped Utility Function
نویسندگان
چکیده
In this paper we examine the problem of nding the optimal solution of the stochastic dynamic growth problem with in nite time horizon for a decision maker described in the prospect theory (PT decision maker) that has asymmetric attitude with respect to a reference level of consumption. We compare the optimal solution of the PT decision maker with the optimal solution of the decision maker with the classic power utility. Numerical results show that the optimal behavior of PT decision maker is quite di erent from the behavior of the power utility investor: the value functions of PT decision maker are still monotone increasing, but non-concave; the optimal investment strategies of PT decision maker are non-monotone.
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