Persistently optimal policies in stochastic dynamic programming with generalized discounting
AbstractIn this paper we study a Markov decision process with a non-linear discount function. Our approach is in spirit of the von Neumann-Morgenstern concept and is based on the notion of expectation. First, we define a utility on the space of trajectories of the process in the finite and infinite time horizon and then take their expected values. It turns out that the associated optimization problem leads to a non-stationary dynamic programming and an infinite system of Bellman equations, which result in obtaining persistently optimal policies. Our theory is enriched by examples.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 31755.
Date of creation: 21 Jun 2011
Date of revision:
Stochastic dynamic programming; Persistently optimal policies; Variable discounting; Bellman equation; Resource extraction; Growth theory;
Find related papers by JEL classification:
- D90 - Microeconomics - - Intertemporal Choice - - - General
- 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-2011-07-02 (All new papers)
- NEP-DGE-2011-07-02 (Dynamic General Equilibrium)
- NEP-ORE-2011-07-02 (Operations Research)
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