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A polyhederal approximation approach to concave numerical dynamic programming

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Author Info

  • Yuichiro Waki

    (University of Minnesota)

  • Kenichi Fukushima

    (University of Wisconsin - Madison)

Abstract

This paper describes a method for solving concave numerical dynamic programming problems which is based a pair of polyhederal approximations of concave functions. The method is robust in that (i) it is globally convergent, (ii) it produces exact error bounds on the computed value function which can in theory be made arbitrarily tight, and (iii) its implementation boils down to solving a sequence of linear programs. This is true regardless of the dimensionality of the state space, the pattern of binding constraints, and the smoothness of model primitives. Numerical examples suggest that the method is capable of producing accurate solutions in an ecient manner.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 689.

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Date of creation: 2011
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Handle: RePEc:red:sed011:689

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  1. John Stachurski, 2006. "Continuous State Dynamic Programming Via Nonexpansive Approximation," KIER Working Papers 618, Kyoto University, Institute of Economic Research.
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  8. Manuel S. Santos, 2000. "Accuracy of Numerical Solutions using the Euler Equation Residuals," Econometrica, Econometric Society, vol. 68(6), pages 1377-1402, November.
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Cited by:
  1. Pál, Jenő & Stachurski, John, 2013. "Fitted value function iteration with probability one contractions," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 251-264.
  2. Jenö Pál & John Stachurski, 2011. "Fitted Value Function Iteration With Probability One Contractions," ANU Working Papers in Economics and Econometrics 2011-560, Australian National University, College of Business and Economics, School of Economics.

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