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The Parameter Set in an Adaptive Control Monte Carlo Experiment: Some Considerations

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  • Marco P. Tucci

    ()

  • David A. Kendrick

    ()

  • Hans M. Amman

    ()

Abstract

Comparisons of various methods for solving stochastic control economic models can be done with Monte Carlo methods. These methods have been applied to simple one-state, one-control quadraticlinear tracking models; however, large outliers may occur in a substantial number of the Monte Carlo runs when certain parameter sets are used in these models. This paper tracks the source of these outliers to two sources: (1) the use of a zero for the penalty weights on the control variables and (2) the generation of nearzero initial estimate of the control parameter in the systems equations by the Monte Carlo routine. This result leads to an understanding of why both the unsophisticated Optimal Feedback (Certainty Equivalence) and the sophisticated Dual methods do poorly in some Monte Carlo comparisons relative to the moderately sophisticated Expected Optimal Feedback method.

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Bibliographic Info

Paper provided by Department of Economics, University of Siena in its series Department of Economics University of Siena with number 507.

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Date of creation: Jul 2007
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Handle: RePEc:usi:wpaper:507

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Keywords: Adaptive control; Monte Carlo experiment; uncertain parameters; outliers.;

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References

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  1. Hans M. Amman & David A. Kendrick, 2003. "A Classification System for Economic Stochastic Control Models," Computing in Economics and Finance 2003 114, Society for Computational Economics.
  2. Marco Tucci & David Kendrick & Hans Amman, 2013. "Expected Optimal Feedback with Time-Varying Parameters," Computational Economics, Society for Computational Economics, vol. 42(3), pages 351-371, October.
  3. Mizrach, Bruce, 1991. "Nonconvexities in a stochastic control problem with learning," Journal of Economic Dynamics and Control, Elsevier, vol. 15(3), pages 515-538, July.
  4. MacRae, Elizabeth Chase, 1975. "An Adaptive Learning Rule for Multiperiod Decision Problems," Econometrica, Econometric Society, vol. 43(5-6), pages 893-906, Sept.-Nov.
  5. Cosimano, Thomas F., 2008. "Optimal experimentation and the perturbation method in the neighborhood of the augmented linear regulator problem," Journal of Economic Dynamics and Control, Elsevier, vol. 32(6), pages 1857-1894, June.
  6. Tucci, Marco P, 1998. "The Nonconvexities Problem in Adaptive Control Models: A Simple Computational Solution," Computational Economics, Society for Computational Economics, vol. 12(3), pages 203-22, December.
  7. Elizabeth Chase MacRae, 1972. "Linear Decision with Experimentation," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 1, number 4, pages 435-445 National Bureau of Economic Research, Inc.
  8. A.L. Norman & M.R. Norman & C.J. Palash, 1979. "Multiple relative maxima in optimal macroeconomic policy: an illustration," Special Studies Papers 134, Board of Governors of the Federal Reserve System (U.S.).
  9. Kendrick, David, 1978. "Non-convexities from probing in adaptive control problems," Economics Letters, Elsevier, vol. 1(4), pages 347-351.
  10. Beck, Gunter W. & Wieland, Volker, 2002. "Learning and control in a changing economic environment," Journal of Economic Dynamics and Control, Elsevier, vol. 26(9-10), pages 1359-1377, August.
  11. Tucci, Marco P., 1997. "Adaptive control in the presence of time-varying parameters," Journal of Economic Dynamics and Control, Elsevier, vol. 22(1), pages 39-47, November.
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Cited by:
  1. D.A. Kendrick & H.M. Amman, 2008. "Comparison of Policy Functions from the Optimal Learning and Adaptive Control Frameworks," Working Papers 08-19, Utrecht School of Economics.
  2. D.A. Kendrick & H.M. Amman & M.P. Tucci, 2008. "Learning About Learning in Dynamic Economic Models," Working Papers 08-20, Utrecht School of Economics.
  3. H.M. Amman & D.A. Kendrick, 2012. "Conjectures on the policy function in the presence of optimal experimentation," Working Papers 12-09, Utrecht School of Economics.
  4. D. Blueschke & V. Blueschke-Nikolaeva & R. Neck, 2013. "Stochastic Control of Linear and Nonlinear Econometric Models: Some Computational Aspects," Computational Economics, Society for Computational Economics, vol. 42(1), pages 107-118, June.

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