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Solution Methods for Microeconomic Dynamic Stochastic Optimization Problems
Author

Christopher D. Carroll
Organization: Johns Hopkins University
URL: http://www.econ.jhu.edu/people/ccarroll/
Old MathSource #

0211-004
Revision date

2000-02-09
Description

These notes describe the solution of several sample dynamic stochastic optimization problems using Mathematica. The first problem solved is a consumption/saving problem, while the second problem solved is a two-state-variable consumption/saving problem where the second state variable is the stock of habits that the consumer is used to satisfying. The third problem adds portfolio choice between a safe and a risky asset to the first problem, and shows how to solve this multiple-control problem. The tricks and techniques used in solving these problems have broad applicability to many dynamic stochastic optimization problems.
Subjects

*Applied Mathematics > Optimization
*Business and Economics
Keywords

dynamic programming, dynamic optimization, stochastic dynamic optimization, stochastic programming
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SolvingMicroDSOP.pdf (275.8 KB) - Lecture Notes
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2period.m (1.7 KB) - Mathematica package
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2period_intexp.m (3.5 KB) - Mathematica package
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2period_intexp_foc.m (1.7 KB) - Mathematica package
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2period_intexp_foc_inv.m (2.2 KB) - Mathematica package
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2period_intexp_foc_inv_constr.m (2 KB) - Mathematica package
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discrete_approx.m (1.1 KB) - Mathematica package
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habits.m (4.4 KB) - Mathematica package
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habits_functions.m (4.7 KB) - Mathematica package
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habits_vars.m (1.4 KB) - Mathematica package