Transcription of Lecture Notes on Dynamic Programming
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Lecture Notes on Dynamic Programming
Lecture Notes on Dynamic ProgrammingEconomics 200E, Professor Bergin, Spring 1998 Adapted from Lecture Notes of Kevin Salyer and from Stokey, Lucas and Prescott (1989)Outline1) A Typical Problem2) A Deterministic Finite Horizon ) Finding necessary ) A special ) Recursive solution3) A Deterministic Infinite Horizon ) Recursive ) Envelope ) A special ) An analytical ) Solution by ) Solution by iteration4) A Stochastic ) Introducing ) Our special case ) Finding Typical ProblemConsider the problem of optimal growth (Cass-Koopmans Model). Recall that in the Solowmodel the saving rate is imposed, and there is no representation of preferences. The optimalgrowth model adds preferences for households, and derives an optimal saving rate. Utilityis maximized for the representative agent, given the technology that they re faced with.
Lecture Notes on Dynamic Programming Economics 200E, Professor Bergin, Spring 1998 ... Capital accumulation takes place through investment and saving. The law of motion for the ... this saving rate will be solution to the optimal saving problem for the current period. 2.3 Solving recursively We can perform this recursive operation explicitly.
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