Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099329 | Journal of Economic Dynamics and Control | 2008 | 38 Pages |
Abstract
The perturbation method is used to approximate optimal experimentation problems. The approximation is in the neighborhood of the linear regulator (LR) problem. The first order perturbation of the optimal decision under experimentation is a combination of the LR solution and a term that captures the impact of the uncertainty on the agent's value function. An algorithm is developed in a companion paper to quickly implement this procedure on the computer. As a result, the impact of optimal experimentation on an agent's decisions can be quantified and estimated for a large class of problems encountered in economics.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Thomas F. Cosimano,