## Notes Information

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Lecture Notes on Dynamic Programming
Economics 200E, Professor Bergin, Spring 1998
Adapted from lecture notes of Kevin Salyer and from Stokey, Lucas and Prescott (1989)
Outline
1) A Typical Problem
2) A Deterministic Finite Horizon Problem
2.1) Finding necessary conditions
2.2) A special case
2.3) Recursive solution
3) A Deterministic Infinite Horizon Problem
3.1) Recursive formulation
3.2) Envelope theorem
3.3) A special case
3.4) An analytical solution
3.5) Solution by conjecture
3.6) Solution by iteration
4) A Stochastic Problem
4.1) Introducing uncertainty
4.2) Our special case again
4.3) Finding distributions
1
1. A Typical Problem
Consider the problem of optimal growth (Cass-Koopmans Model). Recall that in the Solow
model the saving rate is imposed, and there is no representation of preferences. The optimal
growth model adds preferences for households, and derives an optimal saving rate. Utility
is maximized for the representative agent, given the technology that they're faced w...

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