Solving Optimal Timing Problems Elegantly

Tamara Todorova ()

MPRA Paper from University Library of Munich, Germany

Abstract: Few textbooks in mathematical economics cover optimal timing problems. Those which cover them do it scantly or in a rather clumsy way, making it hard for students to understand and apply the concept of optimal time in new contexts. Discussing the plentiful illustrations of optimal timing problems, we present an elegant and simple method of solving them. Whether the present value function is exponential or logarithmic, a convenient way to solve it is to convert the base to the exponential number e, thus making it easy to differentiate the new objective function with respect to time t. This convenient method of base conversion allows to find a second-order derivative and to use the second-order condition as a proof of optimum.

Keywords: optimization of functions of one variable; continuous time; optimal timing; discounted present value; future value (search for similar items in EconPapers)
JEL-codes: A22 C61 Q2 (search for similar items in EconPapers)
Date: 2013-06-13
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/47591/1/MPRA_paper_47591.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:47591

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().