Elements of Numerical Mathematical Economics with Excel

10.3. Setup of the Excel worksheet for optimal control problems

It is time to see how we can implement the OC problems numerically in Excel.

The first two examples are taken purposely from the literature, ⁴ to let the reader realize that different computational approaches may be implemented to solve these problems.

Example 1 (optimal control investment problem)

Let us solve with respect to u the following investment problem, which has the standard form 10.1-1:

max { u } J ( u ) = ∫ 0 1 ( y − 1 2 u 2 ) d t

s . t . y ˙ = u − δ y and y ( 0 ) = 1 , y ( 1 ) = f r e e

In ...