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Finite horizon optimization:Sensitivity and continuity in multi-sectoral models

Authors
Journal
Journal of Mathematical Economics
0304-4068
Publisher
Elsevier
Publication Date
Volume
22
Issue
2
Identifiers
DOI: 10.1016/0304-4068(93)90041-i

Abstract

Abstract This paper studies sensitivity and continuity of finite horizon optimal plans in a general multi-sectoral model of intertemporal optimization which admits non-convexities and technological change. Unlike the aggregative model, investment choices are sensitive to the length of the decision horizon. A new concept of value insensitivity is proposed. It is shown that under this measure, values, unlike investment choices, are indeed insensitive to horizon length even in the multi-sectoral model. Finally, continuity of investment choices and values, in going from the finite to the infinite horizon problem, is established.

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