A Simple Proof of the Necessity of the Transversality Condition

Posted: 16 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

Kamihigashi, Takashi, A Simple Proof of the Necessity of the Transversality Condition. Available at SSRN: https://ssrn.com/abstract=270096

Takashi Kamihigashi (Contact Author)

SUNY at Stony Brook ( email )

Department of Economics
Stony Brook, NY 11794
United States
516-632-7548 (Phone)
516-632-7516 (Fax)

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