Optimality conditions and bubbles in sequential economies and bounded relative risk-aversion (Q1397607)

The authors consider the infinite horizon economy in the framework adopted by \textit{T. Kamihigashi} [Econ. Theory 12, No.1, 103--122 (1998; Zbl 0909.90072)] and \textit{L.Montrucchio} and \textit{F. Privileggi} [J. Econ. Theory 101, 158--188 (2001; Zbl 1006.91034)]. The individual optimal decisions of an infinitely-lived agent in the light of short-run optimality conditions, known as stochastic Euler equation, as well as of long-run type, which are usually known as transversality conditions, are analyzed. The occurrence of pricing bubbles is investigated. New results generalizing the well-known and going deeply into the problem are obtained under suitable conditions. Several examples of bubbles to illustrate the results and underline the importance of adopted assumptions are given.