Perfect foresight dynamics require local determinateness and, consequently, sensitivity to initial conditions. If such dynamics have to be computable, exact integration is needed. We study a non‐linear optimal control problem which cannot be integrated exactly; we also introduce some simpler, implementable policy rules and compare their relative performance. Our results make out a case against perfect foresight as a positive theory of expectations formation and as a useful modelling tool.
HOMEOSTATIC VERSUS ACTIVE POLICIES IN A NONLINEAR OPTIMAL CONTROL PROBLEM
Sacco, Pier Luigi
1993-01-01
Abstract
Perfect foresight dynamics require local determinateness and, consequently, sensitivity to initial conditions. If such dynamics have to be computable, exact integration is needed. We study a non‐linear optimal control problem which cannot be integrated exactly; we also introduce some simpler, implementable policy rules and compare their relative performance. Our results make out a case against perfect foresight as a positive theory of expectations formation and as a useful modelling tool.File in questo prodotto:
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