Optimal pattern of technology adoptions under embodiment: a multi-stage optimal control approach
Optimal Control Applications and Methods
John Wiley & Sons Ltd.
574 - 586
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By deriving the necessary conditions for a multi-stage optimal control problem where the endogenous switching instants appear as an argument of the state equation, we analyze the optimal pattern of technology adoptions under embodiment with a finite planning horizon. We show that the optimal pattern of technology adoptions depends crucially on how the growth rate advantage compares to the adjustment and the obsolescence costs inherent to embodiment. We obtain non-stationary lifetimes for the adopted technologies due to finite planning horizon. We analyze numerically the effects of planning horizon, speed of adjustment to the new technology, growth rate of technology and the impatience rate on the optimal pattern. Copyright © 2010 John Wiley & Sons, Ltd.
Multi-stage optimal control
Finite planning horizon
Optimal control problem
Equations of state
Optimal control systems
Published Version (Please cite this version)http://dx.doi.org/10.1002/oca.960
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