METHODS OF MODELING CONSUMPTION SATURATION WITH UNCERTAINTY IN OPTIMAL STOCKPILE PROBLEMS

Abstract

Economic problems in the optimal management of strategic resource stockpiles can be rigorously studied and solved by formulating them as optimal control problems in continuous time. In these optimal control problems, the proper description of the control constraints and objective function are critical to reflecting a realistic economic model. Existing work in this area often ignores fundamental saturation effects in the economic systems under scrutiny, and the following paper introduces and compares several methods for correcting this common modeling simplification in both deterministic and stochastic contexts.