
#1
Dec911, 09:57 PM

P: 15

How do we solve optimization problems with infinite horizon. I tried to look online for some guidance but nothing but just problems and no solution methods. For example how can I solve:
maximize a_t [itex]\in[/itex][0,1] [itex]\sum\frac{2a_t}{3}[/itex]+log(S_T) where sum goes from 0 to T1 subject to: s_t+1 = s_t *(1+a_t) Some sources say we can use backwards induction but doesn't really tell me how I can do so. Can someone explain the methodology or direct me to somewhere that explains it. Thanks 


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