A viability theory approach to a two-stage optimal control problem
AbstractA two-stage control problem is one, in which model parameters (“technology”) might be changed at some time. An optimal solution to utility maximisation for this class of problems needs to thus contain information on the time, at which the change will take place (0, finite or never) as well as the optimal control strategies before and after the change. For the change, or switch, to occur the “new technology” value function needs to dominate the “old technology” value function, after the switch. We charaterise the value function using the fact that its hypograph is a viability kernel of an auxiliary problem and study when the graphs can intersect and hence whether the switch can occur. Using this characterisation we analyse a technology switching problem.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 10103.
Date of creation: 12 Dec 2007
Date of revision:
value function; viability kernel; viscosity solutions;
Find related papers by JEL classification:
- C69 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Other
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-31 (All new papers)
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