We develop a recursive dual method for solving dynamic economic problems. The method uses a Lagrangian to pair a dynamic recursive economic problem with a dual problem. We show that such dual problems can be recursively decomposed variables. In dynamic contracting and policy settings, the method often replaces an endogenous state space of forward-looking utilities with an exogenously given state space of costates. We provide a principle of optimality for dual problems and give conditions under which the dual Bellman operator is a contraction with the optimal dual value function its unique fixed point. We relate economic problems to their duals, address computational issues and give examples.

The dual approach to recursive optimization: theory and examples

Pavoni, Nicola;Messner, Matthias
2018-01-01

Abstract

We develop a recursive dual method for solving dynamic economic problems. The method uses a Lagrangian to pair a dynamic recursive economic problem with a dual problem. We show that such dual problems can be recursively decomposed variables. In dynamic contracting and policy settings, the method often replaces an endogenous state space of forward-looking utilities with an exogenously given state space of costates. We provide a principle of optimality for dual problems and give conditions under which the dual Bellman operator is a contraction with the optimal dual value function its unique fixed point. We relate economic problems to their duals, address computational issues and give examples.
Pavoni, Nicola; Sleet, Christopher; Messner, Matthias
File in questo prodotto:
File Dimensione Formato  
RecursiveDual_Last_0507.pdf

non disponibili

Tipologia: Documento in Pre-print (Pre-print document)
Licenza: NON PUBBLICO - Accesso privato/ristretto
Dimensione 808.38 kB
Formato Adobe PDF
808.38 kB Adobe PDF   Visualizza/Apri   Richiedi una copia
ECTA11905_delta.pdf

non disponibili

Tipologia: Documento in Pre-print (Pre-print document)
Licenza: NON PUBBLICO - Accesso privato/ristretto
Dimensione 557.33 kB
Formato Adobe PDF
557.33 kB Adobe PDF   Visualizza/Apri   Richiedi una copia
ECMA decision on your submission MS 11905.pdf

non disponibili

Tipologia: Allegato per valutazione Bocconi (Attachment for Bocconi evaluation)
Licenza: NON PUBBLICO - Accesso privato/ristretto
Dimensione 159.51 kB
Formato Adobe PDF
159.51 kB Adobe PDF   Visualizza/Apri   Richiedi una copia
ECMA MS11905-4 Decision letter.pdf

non disponibili

Tipologia: Allegato per valutazione Bocconi (Attachment for Bocconi evaluation)
Licenza: NON PUBBLICO - Accesso privato/ristretto
Dimensione 53.98 kB
Formato Adobe PDF
53.98 kB Adobe PDF   Visualizza/Apri   Richiedi una copia

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/4001203
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 6
  • ???jsp.display-item.citation.isi??? 5
social impact