10.6. Investment model

We will solve now a more complex investment model 7 given by the following:
max { I } J ( I ) = t 0 T ( K a K 2 I 2 ) d t
image
s . t . K ˙ = I δ K and K ( t 0 ) = g i v e n , K ( T ) = f r e e , 0 < δ 1 and a > 0
image
where δ image is the rate of depreciation, K is the capital stock (state variable), I is the investment made, namely the control ...

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