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Using age-structure for a multi-stage optimal control model with random switching time

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  • Wrzaczek, Stefan
  • Kuhn, Michael
  • Frankovic, Ivan

Abstract

The paper presents a transformation of a multi-stage optimal control model with random switching time to an age-structured optimal control model. Following the mathematical transformation, the advantages of the present approach, as compared to a standard backward approach, are discussed. They relate in particular to a compact and unified representation of the two stages of the model, the applicability of well-known numerical solution methods, and the illustration of state- and control dynamics. The paper closes with a simple example on a macroeconomic shock, illustrating the workings and advantages of the approach.

Suggested Citation

  • Wrzaczek, Stefan & Kuhn, Michael & Frankovic, Ivan, 2019. "Using age-structure for a multi-stage optimal control model with random switching time," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 06/2019, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).
  • Handle: RePEc:zbw:tuweco:062019
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    References listed on IDEAS

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    Cited by:

    1. Stefan Wrzaczek & Michael Kuhn & Ivan Frankovic, 2020. "Using Age Structure for a Multi-stage Optimal Control Model with Random Switching Time," Journal of Optimization Theory and Applications, Springer, vol. 184(3), pages 1065-1082, March.

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