Super contact and related optimality conditions

@inproceedings{Dumas2001SuperCA,
  title={Super contact and related optimality conditions},
  author={Bernard Dumas},
  year={2001}
}
Under transactions costs, and generally any sort of friction, economic agents, acting dynamically in a stochastic environment, may find it optimal, in some region of the state space, to take no action at all. Action is triggered when the state of the economic system reaches the boundary of the ‘region of no action’. In this note, first-order conditions for the choice of the region of no action, and for the type of action to be taken, are established, assuming that the uncontrolled state… CONTINUE READING
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