Two Characterizations of Optimality in Dynamic Programming

Two Characterizations of Optimality in Dynamic Programming

It holds in great generality that a plan is optimal for a dynamic programming problem, if and only if it is “thrifty” and “equalizing.” An alternative characterization of an optimal plan, that applies in many economic models, is that the plan must satisfy an appropriate Euler equation and a transver...

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Veröffentlicht in:Applied mathematics & optimization 2010-06, Vol.61 (3), p.421-434
Hauptverfasser: Karatzas, Ioannis, Sudderth, William D.
Format: Artikel
Sprache:eng
Schlagworte:
CALCULATION METHODS
Calculus of Variations and Optimal Control
Optimization
Control
DYNAMIC PROGRAMMING
ECONOMIC ANALYSIS
Economic models
ECONOMICS
EQUATIONS
Euler equations
Joints
Mathematical and Computational Physics
MATHEMATICAL METHODS AND COMPUTING
Mathematical Methods in Physics
MATHEMATICAL MODELS
Mathematics
Mathematics and Statistics
Numerical and Computational Physics
OPTIMIZATION
Random variables
Simulation
Studies
Systems Theory
Theoretical
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Zusammenfassung:It holds in great generality that a plan is optimal for a dynamic programming problem, if and only if it is “thrifty” and “equalizing.” An alternative characterization of an optimal plan, that applies in many economic models, is that the plan must satisfy an appropriate Euler equation and a transversality condition. Here we explore the connections between these two characterizations.
ISSN:0095-4616
1432-0606
DOI:10.1007/s00245-009-9093-x