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Necessary and Sufficient Conditions for Existence and Uniqueness of Recursive Utilities

Jaroslav Borovička, John Stachurski

NBER Working Paper No. 24162
Issued in December 2017
NBER Program(s):Asset Pricing Program

We study existence, uniqueness and stability of solutions for a class of discrete time recursive utilities models. By combining two streams of the recent literature on recursive preferences - one that analyzes principal eigenvalues of valuation operators and another that exploits the theory of monotone concave operators - we obtain conditions that are both necessary and sufficient for existence and uniqueness. We also show that the natural iterative algorithm is convergent if and only if a solution exists. Consumption processes are allowed to be nonstationary.

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Document Object Identifier (DOI): 10.3386/w24162

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