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In this final project we discuss the application of the Dubovitskii-Milyutin version of the Maximum Principle in economics to maximize consumer’s expected lifetime utility by controlling his consumption path. Every human behavior can be modelled to its mathematical model, so does human behavior i...
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| Format: | Final Project |
| Language: | Indonesia |
| Online Access: | https://digilib.itb.ac.id/gdl/view/16910 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | In this final project we discuss the application of the Dubovitskii-Milyutin version of the Maximum Principle in economics to maximize consumer’s expected lifetime utility by controlling his consumption path. Every human behavior can be modelled to its mathematical model, so does human behavior in their consumption behavior (spending their wealth) to fulfill their utility (satisfaction). Firstly, the economic model that developed by S. F. Leung will be explained. This particular economic model is an expected lifetime utility that wil be solved by optimal control, the Maximum Principle with inequality constraints, and the <br />
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Dubovitskii-Milyutin version of the Maximum Principle. The utility function used for finding maximum value of expected lifetime utility is a logarithmic function <br />
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because the function is a concave function. After the optimal result of expected lifetime utility obtained, we create a simulation to show that the expected lifetime <br />
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utility from Dubovitskii-Milyutin version of the Maximum Principal is indeed optimal. |
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