posted on 2005-01-01, 00:00authored byJonathan Caulkins, Gustav Feichtinger, Dieter Grass, Gernot Tragler
A simple optimal control model is introduced, where “bridge building”
positions are rewarded. The optimal solutions can be classified in regards
of the two extern parameters, (1) costs for the control staying at such
an exposed position and (2) the discount rate. A complete analytical
description of the bifurcation lines in parameter space is derived, which
separates regions with different optimal behavior. These are resisting the
influence from inner and outer forces, always fall off from the boundaries
or decide based on one’s initial state. This latter case gives rise to the
emergence of so-called Dechert-Nishimura-Skiba (DNS) points describing
optimal solution strategies. Furthermore the bifurcation from a single
DNS point into two DNS points has been analyzed in parameter space.
All these strategies have a funded interpretation within the limits of the
model.