An Exercise on Discrete-Time Intertemporal Optimization

Fidelina Natividad-Carlos

No 201306, UP School of Economics Discussion Papers from University of the Philippines School of Economics

Abstract: This paper, using the different alternative methods of dynamic optimization - the Lagrange/Kuhn-Tucker (LKT) method, the substitution method, the Hamiltonian method, and the dynamic programming approach - derives the conditions that must be satisfied by the solution to the so-called Ramsey problem, hopefully in a way that can be understood by advanced undergraduate economics students. This is done by assuming that time is discrete and that, for simplicity but without loss of generality, there are only three periods.

Keywords: Ramsey problem; dynamic optimazation; Lagrange method; Substitution method; Hamiltonian method; dynamic programming (search for similar items in EconPapers)
JEL-codes: C61 D91 E21 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2013-07
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Published as UPSE Discussion Paper No. 2013-06, July 2013

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