Adv. Math. Econ. Volume 3, pp.6382 (2001)
Recursive method in stochastic optimization under compound criteria
Seiichi Iwamoto
Department of Economic Engineering, Graduate School of Economics, Kyushu University 27, Hakozaki 6191, Higashiku, Fukuoka 8128581, Japan


In this paper we propose a recursive method in stochastic optimization
problems with compound criteria. By introducing four (Markov, general, primitive
and expanded Markov) types of policy, we establish an equivalence among three
(general, expanded Markov and primitive) policy clatsSes. It is shown that there
exists an optimal policy in general class. Further we apply this result to range, ratio
and variance problems. We derive both forward recursive formula for pastvalue sets
and backward recursive formula for value functions. The compound criteria is large
for economic decision processes.


dynamic programming, invariant imbedding, compound criteria, backward recursive formula,
forward recursive formula, pastvalue sets, expanded Markov policy, general policy, primitive policy, range, ratio, variance