Imperial College London
Professor Harry Zheng

ProfessorHarryZheng

Faculty of Natural Sciences, Department of Mathematics

Professor of Mathematics
 
 
 
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Contact

 

+44 (0)20 7594 8539h.zheng Website

 
 
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Location

 

6M16Huxley BuildingSouth Kensington Campus

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Summary

 

Publications

Citation

BibTex format

@article{Zheng:2022:10.1287/opre.2022.2328,
author = {Zheng, H and Jang, HJ and Xu, Z},
doi = {10.1287/opre.2022.2328},
journal = {Operations Research},
title = {Optimal investment, heterogeneous consumption and best time for retirement},
url = {http://dx.doi.org/10.1287/opre.2022.2328},
year = {2022}
}
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RIS format (EndNote, RefMan)

TY  - JOUR
AB  - This paper studies an optimal investment and consumption problem with heterogeneous consumption of basic and luxury goods, together with the choice of timefor retirement. The utility for luxury goods is not necessarily a concave function.The optimal heterogeneous consumption strategies for a class of non-homotheticutility maximizer are shown to consume only basic goods when the wealth is small,to consume basic goods and make savings when the wealth is intermediate, and toconsume almost all in luxury goods when the wealth is large. The optimal retirement policy is shown to be both universal, in the sense that all individuals shouldretire at the same level of marginal utility that is determined only by income, labor cost, discount factor as well as market parameters, and not universal, in thesense that all individuals can achieve the same marginal utility with different utilityand wealth. It is also shown that individuals prefer to retire as time goes by ifthe marginal labor cost increases faster than that of income. The main tools usedin analyzing the problem are from PDE and stochastic control theory includingvariational inequality and dual transformation. We finally conduct the simulationanalysis for the featured model parameters to investigate practical and economicimplications by providing their figures.
AU  - Zheng,H
AU  - Jang,HJ
AU  - Xu,Z
DO  - 10.1287/opre.2022.2328
PY  - 2022///
SN  - 0030-364X
TI  - Optimal investment, heterogeneous consumption and best time for retirement
T2  - Operations Research
UR  - http://dx.doi.org/10.1287/opre.2022.2328
UR  - https://pubsonline.informs.org/doi/full/10.1287/opre.2022.2328
UR  - http://hdl.handle.net/10044/1/97733
ER  -
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