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Homework Week 10

MA 208 Optimisation Theory - Homework Week 10 Lent Term 2011 Please submit your solutions by Thursday 24th March at 5 pm. A friend of yours has W pounds to spend (W > 0) over T periods. If in any period he has s pounds in his pocket and spends a of it, his utility in that period is u(s, a) = a (2 s - a)

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16 views2 pages

Homework Week 10

MA 208 Optimisation Theory - Homework Week 10 Lent Term 2011 Please submit your solutions by Thursday 24th March at 5 pm. A friend of yours has W pounds to spend (W > 0) over T periods. If in any period he has s pounds in his pocket and spends a of it, his utility in that period is u(s, a) = a (2 s - a)

Uploaded by

Rachel Wong
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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MA 208 Optimisation Theory - Homework Week 10

Lent Term 2011

Please submit your solutions by Thursday 24th March at 5 pm.

Exercises
1. Given is a T -period dynamic program {S, A, T, (rt )t=1 , (ft )t=1 , (t )t=1 }, where s1 = W ( for some W > 0 );
T T T

S = {s R | s 0}; A = {a R | a 0}; rt (s, a) = a ft (s, a) = s a t (s) = {a R | 0 a


1 2

( t = 1, . . . , T ); ( t = 1, . . . , T ); s}, ( t = 1, . . . , T ).

Determine an optimal strategy for this program. 2. Given is a T -period dynamic program {S, A, T, (rt )t=1 , (ft )t=1 , (t )t=1 }, where s1 = W ( for some W > 0 );
T T T

S = {s R | s 0}; A = {a R | a 0}; rt (s, a) = a (s a) ft (s, a) = s a t (s) = {a R | 0 a s}, ( t = 1, . . . , T ); ( t = 1, . . . , T ); ( t = 1, . . . , T ).

Determine an optimal strategy for this program. 3. A friend of yours has W pounds to spend (W > 0) over T periods. He cannot spend more than he has. And whenever he spends something, that money is gone and cannot be used again. He also does not earn any extra money. Finally, if in any period he has s pounds in his pocket and spends a of it, then his utility in that period is u(s, a) = a (2 s a). (a) Write the utility maximisation problem of your friend as a nite-horizon dynamic program, describing the state space S, the action space A, the reward functions rt , etc. 1

Your friend cannot be bothered with all this complicated stu, so he just follows the following strategy: I just spend some of what I have whatever I feel like, without thinking too much about the future; except for the nal period T in which I spend everything left. (b) Show that your friends strategy is in fact always an optimal strategy! 4. Reading: Book by Sundaram: As indicated in Notes 8.

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