Abstract
Abstract The paper studies a dynamic optimization problem in renewable resource harvesting, capital investment, and financing. It combines two different approaches, viz., renewable resource harvesting with capital investments, and investment policy under a borrowing/lending constraint according to which the interest rate on outstanding debt/lending increases with cumulative debt/lending. The problem is set up as an optimal control model, having two state variables (resource stock and stock of equity) and two controls (effort rate and dividend payout rate). The solution is identified by the maximum principle and a synthesizing procedure.
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