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Using Randomization to Break the Curse of Dimensionality

  • John Rust
  • Department of Economics
  • University of Wisconsin

This paper introduces random versions of successive approximations and multigrid algorithms for computing approximate solutions to a class of finite and infinite horizon Markovian decision problems (MDPs). We prove that these algorithms succeed in breaking the curse of dimensionality for a subclass of MDPs known as discrete decision processes (DDPs).

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Paper provided by EconWPA in its series Computational Economics with number 9403001.

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Date of creation: 29 Mar 1994
Date of revision: 04 Jul 1994
Handle: RePEc:wpa:wuwpco:9403001
Note: TeX file, Postscript version submitted
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Ariel Pakes & Paul McGuire, 1997. "Stochastic Algorithms for Dynamic Models: Markov Perfect Equilibrium, and the 'Curse' of Dimensionality," Cowles Foundation Discussion Papers 1144, Cowles Foundation for Research in Economics, Yale University.
  2. Michael P. Keane & Kenneth I. Wolpin, 1994. "The solution and estimation of discrete choice dynamic programming models by simulation and interpolation: Monte Carlo evidence," Staff Report 181, Federal Reserve Bank of Minneapolis.
  3. Hans M. Amman & David A. Kendrick, . "Computational Economics," Online economics textbooks, SUNY-Oswego, Department of Economics, number comp1.
  4. Judd, Kenneth L., 1996. "Approximation, perturbation, and projection methods in economic analysis," Handbook of Computational Economics, in: H. M. Amman & D. A. Kendrick & J. Rust (ed.), Handbook of Computational Economics, edition 1, volume 1, chapter 12, pages 509-585 Elsevier.
  5. Tauchen, George & Hussey, Robert, 1991. "Quadrature-Based Methods for Obtaining Approximate Solutions to Nonlinear Asset Pricing Models," Econometrica, Econometric Society, vol. 59(2), pages 371-96, March.
  6. Lars Peter Hansen & Ellen R. McGrattan & Thomas J. Sargent, 1994. "Mechanics of forming and estimating dynamic linear economies," Staff Report 182, Federal Reserve Bank of Minneapolis.
  7. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
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