A polyhedral approximation approach to concave numerical dynamic programming

Kenichi Fukushima and Yuichiro Waki

Journal of Economic Dynamics and Control, 2013, vol. 37, issue 11, 2322-2335

Abstract: This paper introduces a numerical method for solving concave continuous state dynamic programming problems which is based on a pair of polyhedral approximations of concave functions. The method is globally convergent and produces computable upper and lower bounds on the value function which can in theory be made arbitrarily tight. This is true regardless of the pattern of binding constraints, the smoothness of model primitives, and the dimensionality and rectangularity of the state space. We illustrate the method's performance using an optimal firm management problem subject to credit constraints and partial investment irreversibilities.

Keywords: Numerical methods; Dynamic programming (search for similar items in EconPapers)
JEL-codes: C61 C63 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (9)

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Related works:
Working Paper: A polyhederal approximation approach to concave numerical dynamic programming (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:37:y:2013:i:11:p:2322-2335

DOI: 10.1016/j.jedc.2013.06.001

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