Decision and Forecast Horizons, Agreeable Plans, and the Maximum Principle for Infinite Horizon Control Problems
Operations Research Letters, Vol. 3, No. 5, pp. 261-265, December 1984
5 Pages Posted: 15 Feb 2009 Last revised: 11 May 2017
Date Written: December 1, 1984
This paper establishes a link between the concepts of optimality used in economic theory for infinite horizon planning models, and the concepts of decision and forecast horizons used in several areas of Management Science. It is shown that decision and forecast horizons induce an alternate definition of optimality which is stronger than the concept of 'agreeable plan' proposed by Hammond. All concepts of optimality share a common property, namely a Principle of Optimality. In an optimal control framework this implies that the maximum principle will be a necessary condition for optimality according to any of these definitions.
Keywords: Multiperiod Problems; Forecast Horizons; Rolling Horizons, Decision Horizons, Planning Horizons. Forecasting, agreeable plans, Maximum principle, infinite horizon contorl problems, optimal control, Optimality principle, Management science and economics
JEL Classification: C61, M11
Suggested Citation: Suggested Citation