Title
A tutorial on the deterministic Impulse Control Maximum Principle : necessary and sufficient optimality conditions A tutorial on the deterministic Impulse Control Maximum Principle : necessary and sufficient optimality conditions
Author
Faculty/Department
Faculty of Applied Economics
Publication type
article
Publication
Amsterdam ,
Subject
Economics
Mathematics
Source (journal)
European journal of operational research. - Amsterdam
Volume/pages
219(2012) :1 , p. 18-26
ISSN
0377-2217
ISI
000301025500003
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
This paper considers a class of optimal control problems that allows jumps in the state variable. We present the necessary optimality conditions of the Impulse Control Maximum Principle based on the current value formulation. By reviewing the existing impulse control models in the literature, we point out that meaningful problems do not satisfy the sufficiency conditions. In particular, such problems either have a concave cost function, contain a fixed cost, or have a control-state interaction, which have in common that they each violate the concavity hypotheses used in the sufficiency theorem. The implication is that the corresponding problem in principle has multiple solutions that satisfy the necessary optimality conditions. Moreover, we argue that problems with fixed cost do not satisfy the conditions under which the necessary optimality conditions can be applied. However, we design a transformation, which ensures that the application of the Impulse Control Maximum Principle still provides the optimal solution. Finally, we show for the first time that for some existing models in the literature no optimal solution exists. (C) 2011 Elsevier B.V. All rights reserved.
E-info
https://repository.uantwerpen.be/docman/iruaauth/8b8b6b/2e11466.pdf
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