Optimal Consumption with an Exponential Utility Function.
Abstract
The paper develops a model for the determination of an individual's optimal consumption strategy when he is faced with a stochastic income stream. With the use of an exponential utility function an upper bound on optimal consumption is found. This upper bound is found to increase as future income becomes more certain. The optimal amount to consume when all future income is deterministic is also found. Finally, examples are given to illustrate the results obtained and to highlight the importance of the selection of the various parameters. (Author)
Document Details
- Document Type
- Technical Report
- Publication Date
- Sep 01, 1973
- Accession Number
- AD0769210
Entities
People
- Alexander C. Ratnofsky
Organizations
- University of California, Los Angeles