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On the Concavity of the Consumption Function with a Quadratic Utility under Liquidity Constraints
Tohoku University, Sendai, Japan
Bank of Japan, Tokyo, Japan
- 1 Tohoku University, Sendai, Japan
- 2 Bank of Japan, Tokyo, Japan
Theoretical Economics Letters·Volume 02 (2012)·Pages 566–569·Published 19 December 2012·DOI10.4236/tel.2012.25104
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Abstract
This paper demonstrates the concavity of the consumption function of infinitely living households under liquidity constraints who are not prudent—i.e. with a quadratic utility. The concavity of the consumption function is closely related to the 3-convexity of the value function.
KeywordsConsumption FunctionLiquidity Constraints
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