Optimal dividend payments in the stochastic Ramsey model (Q963030)

This paper deals with the dividend payments of a self-financing firm in the stochastic Ramsey model. The firm's policy is the dividend payment per capital stock for shareholders. The author derived the stochastic integral equation for the dynamics of capital stock and treated the problem to maximize the expected total discounted dividends, subject to a positive constraint on the capital stock. Using the penalization method, he obtained a solution for the variational inequality associated with the problem and gave a synthesis of the optimal dividend policy.