Hi,

I’m trying to use Dynare to solve the simple, deterministic version of the cake eating problem, for example the one described in section 3 of this link: www2.econ.iastate.edu/tesfatsi/d … cooper.pdf

The utility function I’m using is the square root.

I can’t get it to work, but I’m not sure what I’m doing wrong. Any help would be much appreciated!

Here is my code:

/*

- Cake eating problem

*/

var f;

parameters beta;

beta = 0.9;

model;

(f(-2)-f(-1))^(1/2) = (f(-1)-f)^(1/2)/beta;

end;

initval;

f = 10;

end;

check;

simul;