menu

School of Economics and Finance

Research menu

No. 677: A Generalized Endogenous Grid Method for Non-concave Problems

Giulio Fella , Queen Mary, University of London

May 1, 2011

Download full paper

Abstract

This paper extends Carroll's (2006) endogenous grid method and its combination with value function iteration by Barillas and Fernández-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.

J.E.L classification codes: C63

Keywords:Endogenous grid method, Non-concavity

Return to top