Using Polynomial Approximations to Solve Stochastic Dynamic Programming Problems: or A “Betty Crocker” Approach to SDP
نویسندگان
چکیده
In this paper we put forward an easy-to-implement methodology for solving deterministic or stochastic dynamic programming problems within a standard optimization package such as GAMS. We’ve found the use of orthogonal polynomials to be especially helpful in implementing approximation methods for iterative computation of the infinite-horizon value function, due to their superior convergence properties over standard polynomials. We demonstrate this the properties of this methodology by application to both a standard neo-classical growth model and a natural resource management problem.
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