1. Business
  2. Economics
  3. 1 a simple dynamic programming model of capital accumulation consider...

Question: 1 a simple dynamic programming model of capital accumulation consider...

Question details

1. A simple dynamic programming model of capital accumulation Consider the following economy. Individuals have preferences t-0 and a constraint of the form Show that the optimal policy maximizes log(q) + βν(kt+ 1) where v(ke+1) is the value function derived in pard (d). Now suppose that there is an arbitrary value function of the form Un-1 (kt +1)-Yn + θη-1 log (kt) which appears on the right hand side of the Bellman equation. Show that takes the form and determine the coefficients Yn and On n(ke)max flog(c) +Bvn-1(ken)) Show that the sequence of coefficients Yn) and (On) generated in this manner converges to the γ and θ values that you determined in part (b) from any initial Yo and θο.
Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution