Solution Methods for Microeconomic Dynamic Stochastic Optimization Problems -- from Wolfram Library Archive

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Title

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.

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