Using Age Structure for a Multi-stage Optimal Control Model with Random Switching Time

Stefan Wrzaczek (), Michael Kuhn and Ivan Frankovic
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Stefan Wrzaczek: Vienna Institute of Demography

Journal of Optimization Theory and Applications, 2020, vol. 184, issue 3, No 16, 1065-1082

Abstract: 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.

Keywords: Optimal control theory; Age-structured optimal control theory; Multi-stage; Random switch; Catastrophic disaster; 34K35; 49J55; 49K15 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10957-019-01598-5

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