Title
A Simple Proof of the Necessity of the Transversality Condition
Abstract
This note provides a simple proof of the necessity of the transversality
condition for the differentiable reduced-form model. The proof
uses only an elementary perturbation argument without relying
on dynamic programming. The proof makes it clear that, contrary
to common belief, the necessity of the transversality condition
can be shown in a straightforward way.
Takashi KAMIHIGASHI
Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: (81) 78 803 7036
Fax: (81) 78 803 7059