7.2.3 Shall We Use the Envelope Condition with Endogenous Grid?

Four combinations are possible to obtain from two alternative conditions for image (i.e., FOC (83) and envelope condition (92)) and two alternative grids (i.e., exogenous and endogenous). So far, we have distinguished two competitive methods: one is EGM of Carroll (2005) (FOC (83) and endogenous grid) and the other is our ECM (envelope condition (92) and exogenous grid). Conventional VFI (FOC (83) and exogenous grid) is not competitive. Therefore, we are left to check the remaining combination (envelope condition (92) and endogenous grid).

Example 17

(Inner loop): Combining (92) and ...

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