# What is the result of the Bellman Equation

I'm just starting with dynamic optimization and although I understant the proof's of the theorem I'm not able to fully understand whether the bellman equation is a function , a function valuated at some number (therefore a number) or both. I'm using Stokey Lucas and Prescot Recursive methods for economics dynamics. And they state in chapter 4.1 and 4.2: Given some assumptions about the feasibility set and the $$F(x_t,x_{t+1})$$ This problems are equivalent:

1) Sequential problem (SP) $$sup_{x_{t+1}}(\Sigma_{t=0}^\infty\beta^tF(x_t,x_{t+1}))$$ st $$x_{t+1}\in\Gamma(x_{t+1})$$ for all t

2) Functional Equation (FE)$$\ v(x)= sup_{y\in\Gamma(x)}[F(x,y)+\beta v(y)]$$

What is not clear to me is that: In 1 the result of applying sup operator is a NUMBER (Value function valuated at $$x_0$$ While in 2 as there is a functional equation, the result is a function. The authors seem to talk about a number (chapter 4.1) but then (in chapter 4.2) they state that applying the contraction mapping theorem to 2 we get the solution which is the unique fixed point in the set of continous bounded function, therefore the result is a function

So the solution is a number or a function?

• Typos and misleading notations in the question. – Michael May 31 at 1:20

$$v(x_0) = \sup_{ \{x_t \}_{t \geq 1}} \cdots \quad (1)$$ This defines a function $$v$$, called the value function, which is a type of indirect utility function. For given $$x = x_0$$, the value of $$v(x)$$ is defined to be the sup on the RHS, taken over feasible sequences $$\{ x_t \}$$.
Yes, the function $$v(\cdot)$$ defined by $$(1)$$ satisfies the function (Bellman) equation. Equality is in the sense of functions. The LHS is $$v(\cdot)$$ defined by $$(1)$$. The RHS is another function $$\nu(x) = \sup_{y\in\Gamma(x)}[F(x,y)+\beta v(y)].$$ The claim---the dynamic programming principle---is that they are equal, $$v(\cdot) = \nu(\cdot)$$.