Envelope condition method versus endogenous grid method for solving dynamic programming problems

We introduce an envelope condition method (ECM) for solving dynamic programming problems. The ECM method is simple to implement, dominates conventional value function iteration and is comparable in accuracy and cost to Carroll’s (2005) endogenous grid method. Codes are available. •We introduce the envelope condition method (ECM) for solving dynamic programming problems.•ECM simplifies rootfinding and is faster than conventional value function iteration.•ECM is similar in accuracy and speed to Carroll’s (2005) endogenous grid method (EGM).•We introduce accurate EGM and ECM that approximate derivatives of value function.•Codes are available.