Stochastic intertemporal duality: An application to investment under uncertainty

We present a duality concept for a class of stochastic dynamic optimization problems that especially includes models of investment under uncertainty. This concept allows us to derive explicit characterizations of optimal investment behavior from an adjustment cost model with expectations described by linear or nonlinear stochastic processes. It covers settings that are impenetrable with a direct approach, like expectations with a multimodal density or certain forms of non-convex technologies.