# Tag Info

7

There is no clear right and wrong about this, it's just a matter of convenience. The current-value Hamiltonian is likely to be more convenient when the objective function includes a discount factor. Following Chiang (1), suppose the problem is: $\qquad$Maximise $V = \int_0^T G(t,y,u)e^{-\rho t}$ $\qquad$subject to $\dot y=f(t,y,u)$ $\qquad$and boundary ...

6

In this case you have two state variables, so as you say, you have to check the FOC ($J$ is the Hamiltonian) for $\frac{\partial J}{\partial K}=-\dot\lambda_1$ and $\frac{\partial J}{\partial H}=-\dot\lambda_2$ (besides the FOC for control variables). In this sense the logic is the same as Lagrangian (in static context), there are as many lagrangians, as ...

6

You cannot completely ignore the RHS. Starting with $$\frac{U'(c_{t+1})}{U'(c_{t})}=RHS,$$ replace $t+1$ by $t+\Delta t$ to get $$\frac{U'(c(t+\Delta t))}{U'(c(t))}=RHS_{\Delta t},$$ where $RHS_{\Delta t}$ is the modified version of $RHS$ which contains terms depending on $\Delta t$, e.g. the modified discount factor. Expanding around $c(t)$ (and neglecting ...

6

One way to see (intuitively) the connection between the left hand sides is to write the discrete case as: $$\frac{u'(c(t + \tau))}{u'(c(t))},$$ for $\tau = 1$. Now if we generalise this to a setting where $\tau$ is now a variable in $\mathbb{R}$, this becomes a function of $\tau$. Taking the derivative with respect to $\tau$ and evaluating at $\tau = 0$, ...

5

As already commented, the equation you probably meant is $$\rho V(k)= \sup_c \{\, u(c) + V'(k) ( f(k) -\delta k -c ) \,\}.$$ I have never seen this equation called the HJB equation (probably missing a basic reference on my part). I'll call it "dynamic programming PDE". What you're really asking is the connection between two approaches to solve ...

1

This question is too broad as it stands. There is a longer answer already, but I think it is possible to deal with a core part of the question easily. The concrete question is what is a state-space representation, if possible with some of the intuition, its uses in economics (control theory) My background is in control systems theory, where the notion of a ...

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