Optimal Control and Resources

Michael Caputo

No 2011-07, Working Papers from University of Central Florida, Department of Economics

Abstract: Necessary and sufficient conditions from optimal control theory that are typically used when studying finite and infinite horizon natural resource economics problems are stated. In the finite horizon case their use is demonstrated by deriving an explicit solution of a model describing the optimal cleanup of a hazardous stock. In the infinite horizon case a qualitative characterization of the solution of a renewable resource extraction problem is achieved by employing a phase diagram. Complementary techniques such as comparative dynamics and dynamic envelope results are also employed in order to demonstrate how to extract the maximum amount of information from natural resource economics problems.

Keywords: optimal control theory; necessary conditions; sufficient conditions; transversality conditions; comparative dynamics; dynamic envelope theorem; phase diagram (search for similar items in EconPapers)
JEL-codes: E44 E51 F31 F41 (search for similar items in EconPapers)
Pages: 31 Pages
Date: 2011-08
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