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

See all articles by Alain Haurie

Alain Haurie

Ordecsys Switzerland

Suresh Sethi

University of Texas at Dallas - Naveen Jindal School of Management

Date Written: December 1, 1984

Abstract

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

Haurie, Alain and Sethi, Suresh, Decision and Forecast Horizons, Agreeable Plans, and the Maximum Principle for Infinite Horizon Control Problems (December 1, 1984). Operations Research Letters, Vol. 3, No. 5, pp. 261-265, December 1984 , Available at SSRN: https://ssrn.com/abstract=1343860

Alain Haurie

Ordecsys Switzerland ( email )

Place de l'Etrier 4
ChĂȘne-Bougeries, 1224
Switzerland

Suresh Sethi (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 W. Campbell Road, SM30
Richardson, TX 75080-3021
United States

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