Strong convergence and dynamic economic models

Robert L. Bray*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

Morton and Wecker (1977) stated that the value iteration algorithm solves a dynamic program's policy function faster than its value function when the limiting Markov chain is ergodic. I show that their proof is incomplete, and provide a new proof of this classic result. I use this result to accelerate the estimation of Markov decision processes and the solution of Markov perfect equilibria.

Original languageEnglish (US)
Pages (from-to)43-65
Number of pages23
JournalQuantitative Economics
Volume10
Issue number1
DOIs
StatePublished - Jan 2019

Keywords

  • C01
  • C13
  • C15
  • C61
  • C63
  • C65
  • Markov decision process
  • Markov perfect equilibrium
  • dynamic discrete choice
  • nested fixed point
  • nested pseudo-likelihood
  • relative value iteration
  • strong convergence

ASJC Scopus subject areas

  • Economics and Econometrics

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