Suen, Richard M. H. (2009): Bounding the CRRA Utility Functions.

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Abstract
The constantrelativeriskaversion (CRRA) utility function is now predominantly used in quantitative macroeconomic studies. This function, however, is not bounded and thus creates problems when applying the standard tools of dynamic programming. This paper devises a method for "bounding" the CRRA utility functions. The proposed method is based on a set of conditions that can establish boundedness among a broad class of utility functions. These results are then used to construct a bounded utility function that is identical to a CRRA utility function except when consumption is very small or very large. It is shown that the constructed utility function also satisfies the Inada condition and is consistent with balanced growth.
Item Type:  MPRA Paper 

Original Title:  Bounding the CRRA Utility Functions 
Language:  English 
Keywords:  Utility Function; Elasticity of Marginal Utility; Boundedness 
Subjects:  O  Economic Development, Technological Change, and Growth > O4  Economic Growth and Aggregate Productivity > O41  One, Two, and Multisector Growth Models C  Mathematical and Quantitative Methods > C6  Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C61  Optimization Techniques; Programming Models; Dynamic Analysis 
Item ID:  13260 
Depositing User:  Richard M. H. Suen 
Date Deposited:  09. Feb 2009 03:03 
Last Modified:  11. Feb 2013 21:30 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/13260 