Dynamic Programming under Uncertainty notation of sequence problem

• leave study of dynamics for next week

• Dynamic Recursive Games: Abreu-Pearce-Stachetti

• Application: today’s Macro seminar Recursive Methods Nr.

inearization argument
• review linear dynamics
• stability theorem for Non-Linear dynamics

continue APS:
worst and best value
• Application: Insurance with Limitted Commitment
• stochastic dynamics

discuss Matlab code
• differentiability of value function
• application: neoclassical growth model
• homogenous and unbounded returns, more applications

neoclassical growth application: use all theorems
• constant returns to scale
• homogenous returns
• unbounded returns

“Anything goes”: Boldrin Montrucchio

• Global Stability: Liapunov functions

• Linear Dynamics

• Local Stability: Linear Approximation of Euler Equations

housekeeping: ps#1 and recitation day/ theory general / web page

• finish Principle of Optimality: Sequence Problem ⇐⇒ (for values and plans) solution to Bellman Equation

• begin study of Bellman equation with bounded and continuous F

• tools: contraction mapping and theorem of the maximum

finish off: theorem of the maximum

• Bellman equation with bounded and continuous F

• differentiability of value function • application: neoclassical growth model

• homogenous and unbounded returns, more applications

study Functional Equation (Bellman equation) with bounded and continuous
F
• tools: contraction mapping and theorem of the maximum