ISSN:
1432-5217
Keywords:
Pontryagin's maximum principle
;
infinite planning horizon
;
transversality conditions
Source:
Springer Online Journal Archives 1860-2000
Topics:
Mathematics
,
Economics
Notes:
Abstract The present authors found Kamien-Schwartz's (Ref. 1) theory of limit pricing with infinite planning horizon interesting mainly because of a certain disproportion between the rather simplelooking result, viz., constancy of the optimal price strategy, and its comparatively difficult proof, viz., use of Pontryagin's Maximum Principle (PMP) which in the infinite horizon case is encumbered by the additional difficulty of not leading to a uniquely solvable system of necessary conditions. Quite in consonance with Arrow's opinion referred to in Takayama (Ref. 2, p. 446) that sometimes “the infinite horizon formulation is more convenient and revealing” than the finite one, it turned out that in this special case the original optimization problem could be replaced by a much simpler one and, therefore, the use of PMP avoided.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1007/BF01415069
Permalink