Project C3: Recursive utility with intertemporal substitution and related stochastic representation problems

Summary:

This project studies complex intertemporal control problems that arise in a variety of economic contexts. We develop new methods to tackle such problems, characterize the optimal solutions, and we proceed to study concrete economic applications. In the first funding period, in collaboration with the theory of stochastic partial differential equations studied in research area B, we have developed the basic mathematical theory of recursive utility for complex commodities modeled by a suitable domain in a multidimensional space. We will further explore the mathematical relations to the theory of stochastic partial differential equations. The main goal of this project will be to make the mathematical results fruitful for other economic applications as well, including irreversible investment, location choice, and monopolistic competition.

Recent Preprints: