Non-constant discounting in continuous time

This paper derives the dynamic programming equation (DPE) to a differentiable Markov Perfect equilibrium in a problem with non-constant discounting and general functional forms. Beginning with a discrete stage model and taking the limit as the length of the stage goes to 0 leads to the DPE corresponding to the continuous time problem. The note discusses the multiplicity of equilibria under non-constant discounting, calculates the bounds of the set of candidate steady states, and Pareto ranks the equilibria. © 2005 Published by Elsevier Inc. JEL classification: D83; L50