A Simple Proof of the Necessity of the Transversality Condition
Posted: 16 May 2001
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A Simple Proof of the Necessity of the Transversality Condition
Number of pages: 9
Posted: 15 May 2001
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Abstract
This note provides a simple proof of the necessity of the transversality condition for the differentiable reduced-form model. The proof uses only an elementary perturbation argument without relying on dynamic programming. The proof makes it clear that, contrary to common belief, the necessity of the transversality condition can be shown in a straightforward way.
Keywords: Transversality condition, Reduced-form model, Dynamic optimization
JEL Classification: C61, D90, G12
Suggested Citation: Suggested Citation
Kamihigashi, Takashi, A Simple Proof of the Necessity of the Transversality Condition. Available at SSRN: https://ssrn.com/abstract=270096
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