Abstract
The concept of ‘shadow prices’ is often used in economic analysis. Many books and articles appeared on the existence of shadow prices in dynamic optimisation models (e.g., Maurer [1984], Peterson [1973]) and their usefulness in economics (e.g., Intriligator [1971]). Of course, the most prominent feature of dynamic shadow prices is that they are functions of time. In Optimal Control Theory, especially the shadow prices belonging to the state variables play an important role in the economic interpretation of optimal solutions (e.g., Dorfman [1969]). The shadow price of a state variable, which in technical terms is the value of the costate variable (see p.39), is the rate of change of the maximum attainable value of the objective function as a consequence of a marginal change of the state variable.1
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