A Generalized Endogenous Grid Method for Non-Concave Problems

20 Pages Posted: 24 Apr 2011

See all articles by Giulio Fella

Giulio Fella

Queen Mary, University of London

Date Written: April 21, 2011

Abstract

This paper extends Carroll’s (2006) endogenous grid method and its combination with value function iteration by Barillas and Fernandez-Villaverde (2007) to non-concave problems. The method is illustrated using a consumer problem in which consumers choose both durable and non-durable consumption. The durable choice is discrete and subject to non-convex adjustment costs. The algorithm yields substantial gains in accuracy and computational time relative to value function iteration, the standard solution choice for non-concave problems.

Keywords: Endogenous grid method, non-concavity

JEL Classification: C63

Suggested Citation

Fella, Giulio, A Generalized Endogenous Grid Method for Non-Concave Problems (April 21, 2011). Available at SSRN: https://ssrn.com/abstract=1818643 or http://dx.doi.org/10.2139/ssrn.1818643

Giulio Fella (Contact Author)

Queen Mary, University of London ( email )

Mile End Road
London E1 4NS, London E1 4NS
United Kingdom

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