Dynamic Programming

  1. 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 T-1
    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
     
  2. jcsd
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