The Art of Smooth Pasting (Hardcover) (ISBN-13: 9780415269377)

This book aims to widen the understanding of stochastic dynamic choice and equilibrium models. It offers a simplified and heuristic exposition of the theory of Brownian motion and its control or regulation, rendering such methods more accessible to economists who do not require a detailed, mathematical treatment of the subject. The main mathematical ideas are presented in a context which with which economists will be familiar. Using a binomial approach to Brownian motion, the mathematics is reduced to simple algebra, progressing to some equally simple limits. The starting point of the calculus of Brownian motion - 'Ito's Lemma' - emerges by analogy with the economics of risk-aversion. Conditions for the optimal regulation of Brownian motion, including the important, but often mysterious, 'smooth pasting' condition, are derived in a similar way. Each theoretical derivation is illustrated by developing a significant economic application, drawn mainly from recent research in macroeconomics and international economics.

Author: A. Dixit
ISBN-10: 0415269377
ISBN-13: 9780415269377
Publisher: Routledge
Language: English
Published: 12/06/2001
Pages: 88
Format: Hardcover
Weight: 0.50lbs
Size: 8.82h x 5.58w x 0.49d