The Dual Approach to Recursive Optimization: Theory and Examples

82 Pages Posted: 26 Oct 2011 Last revised: 5 Mar 2016

See all articles by Nicola Pavoni

Nicola Pavoni

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; Centre for Economic Policy Research (CEPR)

Christopher M. Sleet

Carnegie Mellon University - David A. Tepper School of Business

Matthias Messner

University of Cologne

Date Written: September 19, 2015

Abstract

We bring together the theories of duality and dynamic programming. We show that the dual of a separable dynamic optimization problem can be recursively decomposed. We provide a dual version of the principle of optimality and give conditions under which the dual Bellman operator is a contraction with the optimal dual value function its unique fixed point. We relate primal and dual problems, address computational issues and give examples.

Keywords: Dynamic Programming, Duality, Dynamic Contracts

JEL Classification: C61, C73, D82, E61

Suggested Citation

Pavoni, Nicola and Sleet, Christopher M. and Messner, Matthias, The Dual Approach to Recursive Optimization: Theory and Examples (September 19, 2015). Available at SSRN: https://ssrn.com/abstract=1949860 or http://dx.doi.org/10.2139/ssrn.1949860

Nicola Pavoni (Contact Author)

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Christopher M. Sleet

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

HOME PAGE: http://business.tepper.cmu.edu/display_faculty.aspx?id=244

Matthias Messner

University of Cologne ( email )

Albertus Magnus Platz
Cologne, NRW 50923
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
161
Abstract Views
1,588
Rank
275,220
PlumX Metrics