Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/77511
Authors: 
Clausen, Andrew
Strub, Carlo
Year of Publication: 
2012
Series/Report no.: 
Working Paper Series, Department of Economics, University of Zurich 62
Abstract: 
We study general dynamic programming problems with continuous and discrete choices and general constraints. The value functions may have kinks arising (1) at indifference points between discrete choices and (2) at constraint boundaries. Nevertheless, we establish a general envelope theorem: first-order conditions are necessary at interior optimal choices. We only assume differentiability of the utility function with respect to the continuous choices. The continuous choice may be from any Banach space and the discrete choice from any non-empty set.
Subjects: 
envelope theorem
differentiability
dynamic programming
discrete choice
non-smooth analysis
JEL: 
C61
E20
Document Type: 
Working Paper

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