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A stochastic control model of investment, production and consumption
Author(s):
Wendell
H.
Fleming;
Tao
Pang
Journal:
Quart. Appl. Math.
63
(2005),
71-87.
MSC (2000):
Primary 60H30, 91B28, 93E20
Posted:
December 17, 2004
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Additional information
Abstract:
We consider a stochastic control model in which an economic unit has productive capital and also liabilities in the form of debt. The worth of capital changes over time through investment as well as through random Brownian fluctuations in the unit price of capital. Income from production is also subject to random Brownian fluctuations. The goal is to choose investment and consumption controls which maximize total expected discounted HARA utility of consumption. Optimal control policies are found using the method of dynamic programming. In case of logarithmic utility, these policies have explicit forms.
References:
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60H30, 91B28, 93E20
Additional Information:
Wendell
H.
Fleming
Affiliation:
Division of Applied Mathematics, Brown University, Providence, RI 02912
Email:
whf@cfm.brown.edu
Tao
Pang
Affiliation:
Department of Mathematics, NC State University, Raleigh, NC 27695
Email:
tpang@math.ncsu.edu
PII:
S0033-569X-04-00941-1
Received by editor(s):
April 22, 2004
Posted:
December 17, 2004
Copyright of article:
Copyright
2004,
Brown University
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