Strong Convergence and Dynamic Economic Models

28 Pages Posted: 28 Apr 2016 Last revised: 10 Jun 2018

Date Written: April 1, 2018

Abstract

Morton and Wecker (1977) stated that the value iteration algorithm solves a dynamic program's policy function faster than its value function when the limiting Markov chain is ergodic. I show that their proof is incomplete, and provide a new proof of this classic result. I use this result to accelerate the estimation of Markov decision processes and the solution of Markov perfect equilibria.

Keywords: Markov decision process; Markov perfect equilibrium; strong convergence; dynamic discrete choice; nested fixed point; nested pseudo-likelihood

Suggested Citation

Bray, Robert, Strong Convergence and Dynamic Economic Models (April 1, 2018). Available at SSRN: https://ssrn.com/abstract=2770580 or http://dx.doi.org/10.2139/ssrn.2770580

Robert Bray (Contact Author)

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS) ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
276
Abstract Views
1,358
rank
111,288
PlumX Metrics