Approximating Closed Form Solutions to a Class of Feedback Policies
AbstractDynamic optimization problems cover a large class of problems in theoretical and applied economics. A simple iterative algorithm with fast convergence is proposed. It is demonstrated that the algorithm in a few steps produce excellent analytic (closed form) approximations including error bounds to a class of nonlinear problems. The algorithmic scheme is also well suited to produce numerical solutions. The notions of dynamic and potential rents are operationalized. The algorithm is utilizing a relation balancing these concepts. The result is particularly strong in the case of zero discounting where the exact CU-optimal policy is determined in a single step. Applying a particular seed in the general convergent scheme reproduces in a simple way results (formulas) published in the last decade in bioeconomics.
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Bibliographic InfoPaper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2009/8.
Length: 27 pages
Date of creation: 15 Sep 2009
Date of revision:
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Postal: NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Phone: +47 55 95 92 93
Fax: +47 55 95 96 50
Web page: http://www.nhh.no/en/research-faculty/department-of-business-and-management-science.aspx
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Closed form approximations; Contraction algorithm; Renewable resource economics; Capital dynamic modeling; Zero discounting and optimality;
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-14 (All new papers)
- NEP-CMP-2009-11-14 (Computational Economics)
- NEP-MAC-2009-11-14 (Macroeconomics)
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